Diversifying away the risk of war and cross-border political crisis

Omar, Ayman and Wisniewski, Tomasz and Nolte, Sandra (2017) Diversifying away the risk of war and cross-border political crisis. Energy Economics, 64. pp. 494-510. ISSN 0140-9883

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Abstract

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.

Item Type:
Journal Article
Journal or Publication Title:
Energy Economics
Additional Information:
This is the author’s version of a work that was accepted for publication in Energy Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Economics, 64, 2017 DOI: 10.1016/j.eneco.2016.02.015
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2100
Subjects:
ID Code:
78525
Deposited By:
Deposited On:
04 Mar 2016 10:19
Refereed?:
Yes
Published?:
Published
Last Modified:
25 Oct 2020 03:50