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

Omar, Ayman M. A.; Wisniewski, Tomasz Piotr and Nolte, Sandra (2017). Diversifying away the risk of war and cross-border political crisis. Energy Economics, 64 pp. 494–510.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1016/j.eneco.2016.02.015
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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 Item
Copyright Holders: 2016 Elsevier
ISSN: 0140-9883
Keywords: Crude oil price; Safe haven; International crises; Wars
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
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Item ID: 55371
Depositing User: Tomasz Wisniewski
Date Deposited: 11 Jun 2018 13:12
Last Modified: 09 Nov 2019 17:26
URI: http://oro.open.ac.uk/id/eprint/55371
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