Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis

By Elie Bouri, Syed Jawad Hussain Shahzad, David Roubaud, Ladislav Kristoufek, Brian M. Lucey. 2020

450 citations recorded by the source corpus.

Abstract In this study, we compare the safe-haven properties of Bitcoin, gold, and the commodity index against world, developed, emerging, USA, and Chinese stock market indices for the period 20 July 2010–22 February 2018. We apply the wavelet coherency approach and show that the overall dependence between Bitcoin/gold/commodities and the stock markets is not very strong at various time scales, with Bitcoin being the least dependent. We study the diversification potential at the tail of the return distribution through wavelet value-at-risk (VaR) and reveal that the degree of co-movement between gold and stock returns affects the portfolio’s VaR level. Specifically, the benefits of diversification vary in the time-frequency space, with Bitcoin exhibiting a superiority over both gold and commodities. Our findings are useful for investors and financial advisors searching for the best asset among Bitcoin, gold, and commodities to hedge extreme negative movements in stock market indices, while accounting for the heterogeneity in the horizons of investors.

Subfields: Computer Vision and Pattern Recognition, Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/ebb567a45ecff5f4f13de1197a157cee840a2c7a

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Citations in the corpus

Return connectedness across asset classes around the COVID-19 outbreak (2020, background): “As suggested by Baur and Lucey (2010), Bredin et al. (2015), and Bouri et al. (2020) gold can be used as both a hedge and safe heaven by global investors during the uncertain times.”
Searching for safe-haven assets during the COVID-19 pandemic (2020, unknown): “The role of commodities in hedging and as safehaven assets are affected by the recent trend of financialization (Zhang, 2017; Zhang and Broadstock, 2018; Bouri et al., 2020).”
Assessing the safe haven property of the gold market during COVID-19 pandemic (2021, unknown): “…(Ciner, Gurdgiev, & Lucey, 2013; Dee, Li, & Zheng, 2013; Gutiérrez, Franco, & Campuzano, 2013; He, He, O’Connor, & Thijssen, 2018; Iqbal, 2017; Shahzad et al., 2020), debt crisis (Agyei-Ampomah, Gounopoulos, & Mazouz, 2014; Boubaker, Cunado, Gil-Alana, & Gupta, 2020; Bredin, Conlon, & Potì,…”