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Are Timber and Water Investments Safe-Havens?

Sustainable finance and the financial aspects of mitigating the effects of climate change are top of the agenda for policymakers, academicians and practitioners. Very often, the media highlight the price of gold and it use as a safe-haven asset during turbulent financial markets and as a hedge against inflation. Recently, natural capital investing has been at the forefront of the economic agenda as it contributes to combating climate change and stimulating environmental awareness. Professor of Finance, Elias Kampouris, in the College of Business, investigated if timber and water were interlinked with other major investment asset classes: equities, bonds, crude oil, gold, real estate, shipping and currency (€/$); and whether they can contribute towards portfolio diversification for investors, and could be used as hedging instruments. The team of researchers investigated this issue for a comprehensive dataset from 2010 to 2021. They find that timber and water can be used as hedging tools for shipping crude oil and bonds, while provide opportunities for investors to diversify their portfolios. Their results also provide important insights over the coronavirus pandemic period on how volatility was transmitted between asset classes, which, collectively, has important implications for investors, and policy-makers.

Reference: Samitas, A., Papathanasiou, S., Koutsokostas, D., and Elias Kampouris (2022) Are timber and water investments safe-havens? A volatility spillover approach and portfolio hedging strategies for investors, Finance Research Letters.
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