Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management

Aktham Maghyereh, Basel Awartani, Abul Hassan

    Research output: Contribution to journalArticlepeer-review

    13 Citations (Scopus)

    Abstract

    In this paper, we investigate whether gold hedges Sharia-compliant stocks and Sukuk during the period from September 2005 to October 2017. The inference is taken by using both the DCC-GARCH model and the wavelet coherence analysis. On the whole, our finding suggests that gold is not effective in hedging the fluctuations of Sharia-compliant securities. However, we find that combining gold with stocks (and Sukuk) is useful in diversification and portfolio optimization. These results imply that, while gold is an excellent hedge for plain vanilla securities, it is not for Islamic exposures. This is important in light of the increasing amount of assets that are managed according to Islamic screening.

    Original languageEnglish
    Pages (from-to)394-412
    Number of pages19
    JournalJournal of Asset Management
    Volume19
    Issue number6
    DOIs
    Publication statusPublished - Oct 1 2018

    Keywords

    • Gold
    • Hedge
    • Portfolio optimization
    • Sharia-compliant stocks
    • Sukuk
    • Wavelet coherence analysis

    ASJC Scopus subject areas

    • Business and International Management
    • Strategy and Management
    • Information Systems and Management

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