Flavin, Thomas and Morley, Ciara and Panopoulou, Ekaterini (2014) Identifying safe haven assets for equity investors through an analysis of the stability of shock transmission. Journal of International Financial Markets, Institutions and Money, 33. pp. 137-154. ISSN 1042-4431

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Abstract

Our analysis takes the perspective of an equity fund manager who seeks a potential safe haven asset to protect her portfolio during market downturns. We employ a regime-switching framework, within which we separate common and idiosyncratic shocks, to assess the suitability of gold, 10-year and 1-year U.S. Treasury bonds. We find evidence in favor of choosing either gold or the longer-dated bond as our safe haven asset. Both deliver risk reduction benefits as equity markets plunge. In contrast, the 1-year bond is not suitable as its vulnerability to contagious idiosyncratic shocks more than offsets its ability to hedge against common risk factors.

Item Type:	Article
Keywords:	Safe haven assets; Financial market crises; Shock transmission; Regime switching;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	5324
Identification Number:	https://doi.org/10.1016/j.intfin.2014.08.001
Depositing User:	Thomas Flavin
Date Deposited:	02 Sep 2014 16:27
Journal or Publication Title:	Journal of International Financial Markets, Institutions and Money
Publisher:	Elsevier
Refereed:	Yes
URI:	http://www.sciencedirect.com/science/jou...
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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