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

Ayman M.A. Omar, Tomasz Piotr Wisniewski, Sandra Nolte

Research output: Contribution to journalArticle

10 Citations (Scopus)
9 Downloads (Pure)

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.

Publisher Statement: NOTICE: 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, (2016)] DOI: 10.1016/j.eneco.2016.02.015

© 2016, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Original languageEnglish
Pages (from-to)494-510
Number of pages17
JournalEnergy Economics
Volume64
Early online date4 Mar 2016
DOIs
Publication statusPublished - May 2017

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Economics
Shareholders
Insurance
Quality control
Crude oil
Oils
Financial markets
Energy economics
Assets
Oil
Cross-border
Equity
Optimal portfolio
Safe haven
Crude oil price
Government bonds
Control mechanism
Military
Bond market
Attribution

Keywords

  • Crude Oil Price
  • Safe Haven
  • International Crises
  • Wars

Cite this

Diversifying away the risk of war and cross-border political crisis. / Omar, Ayman M.A.; Wisniewski, Tomasz Piotr; Nolte, Sandra.

In: Energy Economics, Vol. 64, 05.2017, p. 494-510.

Research output: Contribution to journalArticle

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