The Role of CAT Bonds in an International Multi-Asset Portfolio: Diversifier, Hedge, or Safe Haven?

17 Pages Posted: 23 Apr 2019

See all articles by Wolfgang Drobetz

Wolfgang Drobetz

University of Hamburg

Henning Schröder

University of Hamburg - Hamburg Business School; Hamburg Financial Research Center

Lars Tegtmeier

University of Applied Sciences Merseburg

Date Written: March 21, 2019

Abstract

We examine whether CAT bonds can serve as a hedge or a safe haven for global stock, bond, real estate, commodity, private equity, and infrastructure markets. Our results indicate that CAT bonds are a poor hedge, but they act as an effective diversifier against all asset classes under investigation. Moreover, CAT bonds can serve as a strong safe haven against extreme price drops of stocks only during the post-crisis period.

Keywords: CAT Bonds, Alternative Investments, Diversifier, Hedge, Safe Haven, DCC GARCH

JEL Classification: G11, G15

Suggested Citation

Drobetz, Wolfgang and Schröder, Henning and Tegtmeier, Lars, The Role of CAT Bonds in an International Multi-Asset Portfolio: Diversifier, Hedge, or Safe Haven? (March 21, 2019). Available at SSRN: https://ssrn.com/abstract=3359277 or http://dx.doi.org/10.2139/ssrn.3359277

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Henning Schröder

University of Hamburg - Hamburg Business School ( email )

Moorweidenstr. 18
Hamburg, 20148
Germany

Hamburg Financial Research Center ( email )

c/o University of Hamburg
Moorweidenstr. 18
Hamburg, 20148
Germany

Lars Tegtmeier (Contact Author)

University of Applied Sciences Merseburg ( email )

Eberhard-Leibnitz-Straße 2
Merseburg, Sachsen-Anhalt 06217
Germany

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