Different Safe Harbours in Different Winds : Do Safe Havens Differ When the Oil Price Falls for Different Reasons?
Analogous to an experienced mariner choosing a safe harbour depending on the wind direction, we hypothesise safe-haven asset(s) are conditional on the cause of the market fall. Using oil markets as a salient case study, we find that traditional safe-haven assets, such as the US dollar and government bonds serve as safe-haven assets only when oil prices fall due to declines in actual or expected demand. Stock markets offer safe-haven protection when oil prices fall due to oil supply increases. Given that it is difficult to definitively identify the cause of an oil price fall in real time, our key insight is that investors should invest in a portfolio of safe-haven assets to protect against potential losses to their investments from such energy market shocks
Year of publication: |
2023
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Authors: | Cheema, Muhammad A. ; Faff, Robert W. ; Ryan, Michael |
Publisher: |
[S.l.] : SSRN |
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