Abstract
During recent years the world has witnessed several unprecedented crises that affected the international financial markets. Indeed, the COVID-19 pandemic and the Russia–Ukraine conflict caused major perturbations that slowed down the economic and financial development around the globe. International investors are switching their attention to more reliable assets as a refuge to their portfolios. This paper investigates the hedge and safe haven properties of gold and major cryptocurrencies, mainly Bitcoin and Ethereum. Empirical analysis is conducted on main fiat currencies using the multivariate asymmetric dynamical conditional correlation model. Results show that gold has a superior hedging effectiveness compared to cryptocurrencies. Moreover, the precious metal and the digital currencies are safe havens for almost all fiat currencies.
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Notes
The estimation of the A-DCC model is performed using the R project for statistical computing with the rugarch package for univariate GARCH-type models, and rmgarch package for the multivariate correlation model. The software and packages are available from https://cran.r-project.org/.
The method proposed by Baur & McDermott (2010, p. 1893) includes a time varying coefficient \(b_t\) to estimate from the regression. However, Ratner and Chiu (2013) improved this method by substituting \(b_t\) with the pairwise dynamic conditional correlation \(ADCC_{ij,t}\) estimated from a multivariate GARCH model.
I could not extend the sample prior to 2016 due to the limited availability of Ethereum data.
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BenSaïda, A. Safe haven property of gold and cryptocurrencies during COVID-19 and Russia–Ukraine conflict. Ann Oper Res (2023). https://doi.org/10.1007/s10479-023-05517-w
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DOI: https://doi.org/10.1007/s10479-023-05517-w