SAFE HAVEN AND HEDGE PERFORMANCE OF USD AND GOLD IN ASEAN-6 EQUITY MARKETS

Abstract

Investors in emerging ASEAN-6 equity markets face persistent challenges in identifying reliable safe-haven assets to protect portfolios during periods of heightened market volatility. Traditional safe havens, such as gold, may not consistently provide the expected protection in these markets, while the safe-haven role of the US dollar (USD) remains relatively underexplored. This study examines whether the USD and gold function as safe havens, hedges, or diversifiers for ASEAN-6 stock indices and evaluates their effectiveness within portfolio allocation strategies. Using daily data spanning 2013 to 2023, we estimate pairwise time-varying dependence between the USD, gold, and six ASEAN equity markets employing DCC-GARCH and dynamic copula models. The results indicate that the roles of the USD and gold vary across markets and over time. The USD consistently acts as a safe haven and a hedge, whereas gold’s role alternates between that of a hedge and a diversifier depending on market conditions. Portfolio allocation results further show that the USD is generally prioritized over gold, particularly in strategies focused on variance reduction and diversification maximization. Overall, the findings offer important insights for portfolio management and risk mitigation in emerging ASEAN equity markets.