Cargando…

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...

Descripción completa

Detalles Bibliográficos
Autores principales: Yun, Seok-Jun, Choi, Sun-Yong, Kim, Young Sung
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2023
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
_version_ 1785116114670321664
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
work_keys_str_mv AT yunseokjun examiningthehedgeperformanceofusdollarvixandgoldduringthecoronaviruspandemicisusdollarabetterhedgeasset
AT choisunyong examiningthehedgeperformanceofusdollarvixandgoldduringthecoronaviruspandemicisusdollarabetterhedgeasset
AT kimyoungsung examiningthehedgeperformanceofusdollarvixandgoldduringthecoronaviruspandemicisusdollarabetterhedgeasset