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Diversifying away the Risk of War and Cross-Border Political Crisis

journal contribution
posted on 2016-03-01, 15:03 authored by Tomasz Piotr Wisniewski, S. Nolte, Ayman M.A. Omar
This paper investigates the behavior of crude oil prices, government bonds, and stock market indices around outbreaks of severe international crises and wars. Using a constant mean return event study, we show that these events are associated with positive and significant abnormal returns on oil and bonds, which means that these two asset classes can potentially shelter shareholders from plummeting equity values during international crises. A formal safe haven analysis confirms this insight. Such price movements may reflect a reallocation of funds across asset classes in response to the events, as well as shifts in the demand for oil due to precautionary, speculative, and military motives. We also calculate the weights for optimal portfolios, which could provide insurance against conflict risk.

History

Citation

Energy Economics, 2017, 64, pp. 494-510

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Management

Version

  • AM (Accepted Manuscript)

Published in

Energy Economics

Publisher

Elsevier

issn

0140-9883

Acceptance date

2016-02-17

Copyright date

2016

Publisher version

http://www.sciencedirect.com/science/article/pii/S0140988316300305

Notes

The file associated with this record is under a 48-month embargo from publication in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.

Language

en

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