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Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset?
This study utilizes the hedging potential of the U.S. Dollar Index (USDX) during the COVID-19 period, specifically comparing its positive effects on optimal portfolio weights and hedging ratios with those of traditional hedging assets, such as the VIX and gold. The scalar BEKK GARCH model is employe...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Public Library of Science
2023
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10553206/ https://www.ncbi.nlm.nih.gov/pubmed/37796831 http://dx.doi.org/10.1371/journal.pone.0291684 |
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author | Yun, Seok-Jun Choi, Sun-Yong Kim, Young Sung |
author_facet | Yun, Seok-Jun Choi, Sun-Yong Kim, Young Sung |
author_sort | Yun, Seok-Jun |
collection | PubMed |
description | This study utilizes the hedging potential of the U.S. Dollar Index (USDX) during the COVID-19 period, specifically comparing its positive effects on optimal portfolio weights and hedging ratios with those of traditional hedging assets, such as the VIX and gold. The scalar BEKK GARCH model is employed to forecast volatility and calculate hedging indicators. The results show that USDX exhibits strong hedging abilities against S&P 500 index volatility. These findings highlight the advantageous role of the USDX as a hedging instrument, particularly during periods of heightened market uncertainty, such as during the COVID-19 crisis. Despite the increased market volatility during the COVID-19 pandemic, the value of the optimal portfolio weights is stable and the volatility of the weights is significantly reduced, demonstrating the strength of the USDX’s low risk and volatility in hedging against market fluctuations. Moreover, the increase in the hedge ratio indicates that more capital is allocated to hedging, reflecting the increased correlation between the USDX and S&P 500 index. These results emphasize the beneficial role of the USDX as a hedging instrument during times of elevated market uncertainty, such as during the COVID-19 crisis. Ultimately, USDX can provide valuable insights for market participants seeking effective hedging strategies. |
format | Online Article Text |
id | pubmed-10553206 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2023 |
publisher | Public Library of Science |
record_format | MEDLINE/PubMed |
spelling | pubmed-105532062023-10-06 Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? Yun, Seok-Jun Choi, Sun-Yong Kim, Young Sung PLoS One Research Article This study utilizes the hedging potential of the U.S. Dollar Index (USDX) during the COVID-19 period, specifically comparing its positive effects on optimal portfolio weights and hedging ratios with those of traditional hedging assets, such as the VIX and gold. The scalar BEKK GARCH model is employed to forecast volatility and calculate hedging indicators. The results show that USDX exhibits strong hedging abilities against S&P 500 index volatility. These findings highlight the advantageous role of the USDX as a hedging instrument, particularly during periods of heightened market uncertainty, such as during the COVID-19 crisis. Despite the increased market volatility during the COVID-19 pandemic, the value of the optimal portfolio weights is stable and the volatility of the weights is significantly reduced, demonstrating the strength of the USDX’s low risk and volatility in hedging against market fluctuations. Moreover, the increase in the hedge ratio indicates that more capital is allocated to hedging, reflecting the increased correlation between the USDX and S&P 500 index. These results emphasize the beneficial role of the USDX as a hedging instrument during times of elevated market uncertainty, such as during the COVID-19 crisis. Ultimately, USDX can provide valuable insights for market participants seeking effective hedging strategies. Public Library of Science 2023-10-05 /pmc/articles/PMC10553206/ /pubmed/37796831 http://dx.doi.org/10.1371/journal.pone.0291684 Text en © 2023 Yun et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. |
spellingShingle | Research Article Yun, Seok-Jun Choi, Sun-Yong Kim, Young Sung Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title | Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title_full | Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title_fullStr | Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title_full_unstemmed | Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title_short | Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset? |
title_sort | examining the hedge performance of us dollar, vix, and gold during the coronavirus pandemic: is us dollar a better hedge asset? |
topic | Research Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10553206/ https://www.ncbi.nlm.nih.gov/pubmed/37796831 http://dx.doi.org/10.1371/journal.pone.0291684 |
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