Seeking a Shock Haven : Hedging Extreme Upward Oil Price Changes

Crude oil is prone to large upward price shocks, creating challenges for personal and corporate budgeting. In this paper, we systematically assess a range of possible shock havens against large oil price shocks. Empirical tests uncover a rich set of assets which act both as hedges and shock havens, including precious metals, soft commodities, and currencies. The range of possible hedges is extensive, marked by a positive correlation with oil returns on average. Gold, silver, platinum, corn, and wheat are shown to provide consistent shock haven properties across various specifications, including those surrounding large price changes observed during the COVID-19 Pandemic and following the invasion of Ukraine