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The dynamic connectedness between private equities and other high-demand financial assets: A portfolio hedging strategy during COVID-19

Author

Listed:
  • Spyros Papathanasiou
  • Dimitrios Vasiliou
  • Anastasios Magoutas
  • Drosos Koutsokostas

Abstract

In view of the need for portfolio diversification, we investigate the interlinkages between a private equity ETF and a set of high-demand asset classes including bonds, equities, crude oil, gold, commodities, currency, Bitcoin, and shipping within a spillover framework. For this objective, we apply the enhanced modification of the Diebold and Yilmaz approach for the period 1 January 2010 to 31 January 2023. The empirical findings indicate a modest degree of connectedness among the investigated markets, whereas volatility spillovers showed acceleration during tumultuous periods. In addition, we assess the capacity of private equities for hedging, for the whole sample period and during COVID-19 infectious disease, in order to suggest investors for potential portfolio restructures. Results demonstrate that the short position in the volatility of private equity ETF can result in strong hedging effectiveness for investors holding long positions in Bitcoin, shipping, bonds, and crude oil. JEL Classification: C32, C58, G11, G15

Suggested Citation

  • Spyros Papathanasiou & Dimitrios Vasiliou & Anastasios Magoutas & Drosos Koutsokostas, 2025. "The dynamic connectedness between private equities and other high-demand financial assets: A portfolio hedging strategy during COVID-19," Australian Journal of Management, Australian School of Business, vol. 50(1), pages 200-219, February.
    • Handle: RePEc:sae:ausman:v:50:y:2025:i:1:p:200-219
    DOI: 10.1177/03128962231184658
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    More about this item

    Keywords

    Alternative investments; Bitcoin; crude oil; gold; private equities; volatility spillovers;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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