Gold for global airline stock indices during COVID-19: Hedge or safe-haven asset?

We examine whether airline industry investors can gain hedging and/or safe-haven benefits from holding gold in a portfolio of global and regional airline stocks during the COVID-19 pandemic. Using daily data from June 8, 2016 until June 8, 2021, we employ multivariate GARCH models and show partial co-volatility spillovers of negative signs and evidence of weak but unstable correlations between gold and each of the four global/regional airline stock indices. We calculate hedge ratios, optimal weights, and hedging effectiveness and reveal that, during the peak of the pandemic, global airline investors expanded their investment in gold as a “flight-to-safety” asset, leading to substantial hedging effectiveness. Finally, we run regression models and the results indicate that gold is not a strong safe-haven asset against the downside risk of airline stock indices but acts as a strong hedge in many cases. Our findings are robust to the choice of the multivariate GARCH model.