Table 7 Selected Recent Studies’ Findings Versus This Research’s Findings

Authors

Methodology

Findings

Ibrahim (2012)

An autoregressive distributed lag model was used. There were 2261 daily observations spanning from August 1, 2001 to March 31, 2010. Domestic gold bullion and the Kuala Lumpur composite index are used.

Gold can be used as an investment asset for the Malaysian emerging equity market. Gold maintains its low positive relation with stock market variations regardless of the market conditions. Gold tends to possess a hedging property in times of equity turbulence.

This research extends Ibrahim (2012)‘s study by investigating the dynamic nature of gold and equity. Our finding seems to support the initiative by the Malaysian Government to introduce various gold coins, such as Kijang Emas, Royal Mint Gold Dinar, and Kelantan State Gold Dinar, as alternative assets to preserve wealth in the state of financial turbulence.

Robiyanto et al. (2017)

The authors used monthly closing prices of the Indonesian and Malaysian stock exchanges and gold, silver, platinum, and palladium from the international markets from January 1999 to July 2014. The DCC-GARCH was used.

Gold earned the highest hedging effectiveness on both the Indonesian and Malaysian equities. Hedged portfolio has a lower Sharpe ratio than an unhedged portfolio.

Our study partially supports Robiyanto et al. (2017) since only the oil-hedged ratio has a lower Sharpe ratio than the unhedged portfolio. The difference could be due to our study’s use of weekly instead of monthly data. Further, our study also calculates performance analysis based on the skewness of the return distribution, which found that maximum drawdown reveals that gold-hedged strategy is marginally better than the put replication strategy in Malaysia during the crisis period

Wan et al. (2016)

The authors used the MGARCH model with daily oil price changes as the exogenous variable on Asian stock markets over the period from 1999 to 2014.

The rise of oil prices can drive the stock market into turmoil since transportation and production costs may also increase. The stock markets in East Asia are interdependent when there is a negative shock on oil price, indicating that the diversification benefit is limited in the region. Negative shock on oil prices has a big effect on stock market volatility. Hong Kong, South Korea, and Singapore are recommended as hedges for stock investing especially during negative oil shocks.

This research supports and extends Wan et al. (2016) with DCC-GARCH and several portfolio measurements, and has found that there is a low correlation between oil and equity in ASEAN-5. This study also found that the all-equity stock portfolio in Singapore offers better performance than other strategies since the its capital market is the most advanced stock market in Southeast Asia.

Ming, Shen, Yang, Zhu, and Zhu (2019)

The authors used the wavelet approach and gathered data on spot gold prices from the Shanghai Composite Index from 1991 to 2016.

Gold is not a hedging instrument for equity in the short term period in China, the UK, and the US. However, after 2005, gold became a hedging instrument in the long run in China, but not in the UK and the US.

This research partially supports the findings of Ming et al. (2019) since gold is a safe haven in Malaysia and hedging instruments in other ASEAN-5 countries. The authors argue that marketization and trading rules in China are different from those of ASEAN-5 nations, especially Malaysia.

Maghyereh et al. (2017)

A multivariate DCC-GARCH model was employed to calculate the spillovers, dynamic correlations, and optimal hedge ratios between the financial assets studied, which is gold, oil, and equity in GCC nations.

The dynamic correlations were positive and low between oil and equities, as well as between oil and gold. The dynamic correlations between GCC stocks and gold were negative and low during the financial crisis, and oil and gold were cheap hedges during normal periods.

This research partially supports the findings of Maghyereh et al. (2017) in the following ways. Firstly, there is a negative and low correlation between gold and equities in the financial crisis period except for Indonesia and Thailand. Secondly, we also found that gold hedge is cheaper than oil.

Mensi (2019)

The authors used the wavelet method, Value at Risk measurement, and daily closing spot price data for the Tadawul All Share Index (TASI) as well as their corresponding 15 sectors.

The results showed notable co-movements between crude oil and equity markets over time and across frequencies. Further, these co-movements strengthened in the global financial crisis.

This research partially supports Mensi (2019). It shows that only the Philippines has a better oil-hedged performance during the crisis period. It seems that the oil effect on Philippine stocks is weak. In other words, the co-movements of ASEAN-5 stock markets, except for the Philippines, have increased among themselves and in the same path during the oil shocks.

Pandey (2018)

The authors used three multivariate GARCH models (DCC, CCC, and BEKK) to obtain oil price shocks and gold price shocks. Their correlations were tested on the BRICS equity markets.

The results showed notable volatility spillover from both the crude oil and gold to the BRICS equity markets. There is evidence of a low (positive) correlation between gold/crude oil and the equity markets of India and China, and thus the use of gold/crude oil would be limited for these markets.

This research supports Pandey (2018) that there is evidence of a low (positive) correlation between gold/crude oil and the ASEAN-5 equity markets’ overall sample period. We also found that gold hedge is cheaper than oil.

Uzo-Peters, Laniran, and Adenikinju (2018)

The authors used a VAR model with the impulse response function and forecast variance decomposition error. The data sources were daily stock price and oil price from January 2007 to December 2014.

The results showed that oil companies in Nigeria should take a position in the oil futures market to diversify their investment.

This research contradicts Uzo-Peters et al. (2018) since the drawdown of the oil-hedged portfolio is worse than the all-equity portfolios under all sample periods. We argue that the reason for this difference is because Uzo-Peters et al. (2018) used oil companies while we used the stock index.