Are Timber and Water Investments Safe-Havens? A Volatility Spillover Approach and Portfolio Hedging Strategies for Investors

Using a time-varying spillover approach, we investigate volatility spillovers between natural alternative investments, i.e. timber and water, and a battery of traditional instruments comprising equities, bonds, crude oil, gold, real estate, shipping and currency, for the period 1/1/2010-9/30/2021. Results show that the sample markets are moderately integrated and total connectedness escalated during stress periods. Moreover, we examine the hedging ability of timber and water by constructing optimal hedge ratios and portfolio weights. Both assets constitute an effective hedging tool for shipping, crude oil and bond investors, with the short position in the volatility of water to provide higher hedging effectiveness

Volatility spillovers between fine wine and major global markets during COVID-19: A portfolio hedging strategy for investors

Motivated by the growing necessity of portfolio diversification, this paper investigates the dynamic connectedness among fine wine, equities, bonds, crude oil, commodities, gold, copper, shipping and real estate by applying the Diebold and Yilmaz (2012) approach, based on the time-varying parameter vector autoregressive (TVP-VAR) model of Antonakakis et al. (2020), for the period 1/1/2010-5/31/2021. Our results indicate moderate volatility spillovers among the markets over time, whereas total connectedness is prone to exogenous shocks, reaching its peak during stress periods. Equities, crude oil, gold and fine wine are the net contributors of spillovers, whereas real estate, commodities, copper, bonds and shipping constitute the net receivers of the diffused shocks. Furthermore, we estimate and compare the hedging ability of fine wine, before and after the emergence of the coronavirus pandemic, to instruct investors in rebalancing their portfolio strategies during COVID-19. The empirical findings suggest that fine wine can form an effective hedging tool to reduce the risk deriving from adverse movements of the markets and its hedging ability was enhanced during COVID-19, with few exceptions. Regardless time period, the highest hedging effectiveness can be achieved by taking a long position in the volatility of crude oil and a short position in the volatility of fine wine

Can mutual fund managers predict security prices to beat the market?The case of Greece during the debt crisis

The purpose of this paper is to examine the performance of Greek equity mutual funds, elaborating on stock selection in parallel with market timing measures, in comparison with the performance of ETFs and index funds for the period 01/24/2008-05/12/2017, and the short-term performance persistence of actively managed funds for the period 05/12/2015-05/12/2017. Using all domestic equity mutual funds at our disposal and daily data, the authors apply multi-factor models to estimate risk-adjusted returns and to evaluate the selectivity and market timing ability of fund managers. In order to investigate short-term performance persistence, the coexistence of stock selection and market timing strategy is allowed and a battery of parametric and nonparametric tests is implemented. Results show that actively managed mutual funds underperformed the market index, as well as passively managed ETFs and index funds, primarily due to the managers’ inability to time the market. Furthermore, a winner-picking strategy to outperform a-buy-the-market-and hold policy is questioned

The connectedness between Sukuk and conventional bond markets and the implications for investors

Purpose: The purpose of this paper is to examine the connectedness across a variety of Sukuk and conventional bond indices and the implications for optimal asset allocation for the period January 1, 2010–April 30, 2020. Design/methodology/approach: The data set consists of five major Sukuk (Dow Jones Sukuk, Thompson Reuters BPA Malaysia Sukuk, Indonesia Government Sukuk, S&P MENA Sukuk and Tadawul Sukuk and Bonds Index) and five conventional bond indexes, one for developed (USA) and four for emerging markets (Malaysia, Indonesia, Africa and Qatar). This study investigates the connectedness and volatility spillover effects across the aforementioned indices, by following the Diebold and Yilmaz (2012) approach, based on the time-varying parameter vector autoregressive (TVP-VAR) model. In addition, this paper provides optimal hedge ratios and portfolio weights for investors. Findings: The empirical results show that Sukuk and conventional bond markets are highly integrated and that total connectedness exhibits sensitivity to exogenous shocks. The Dow Jones and the Malaysian Sukuk indices are the primary shock transmitters to other markets. However, the weak volatility spillovers between the Dow Jones and conventional bonds suggest that opportunities for optimal asset allocation may in fact exist. The highest (lowest) hedging effectiveness can be achieved by taking a short position in Malaysian (Qatarian) bonds. Originality/value: To the best of the knowledge, this is the largest sample taken into account to investigate the connectedness between Sukuk and conventional bonds