EXPLORING THE ROLE OF CRYPTOCURRENCIES AS A SAFE HAVEN IN EMERGING STOCK MARKETS DURING COVID-19
DOI:
https://doi.org/10.37547/ijmef/Volume03Issue05-04Keywords:
Cryptocurrencies, safe haven,, emerging stock markets, COVID-19Abstract
This study investigates the role of cryptocurrencies as a safe haven in emerging stock markets during the COVID-19 pandemic. Using data from five emerging stock markets and their respective cryptocurrency markets, the study employs a multivariate GARCH model to analyze the relationship between stock market and cryptocurrency returns and volatility. The results show that cryptocurrencies, particularly Bitcoin, exhibit a safe haven effect during times of financial distress in emerging stock markets. However, this effect is limited to short-term periods, and the correlation between cryptocurrencies and stock markets tends to converge over time. These findings have important implications for investors and policymakers in emerging stock markets, as cryptocurrencies can serve as a valuable diversification tool but also carry inherent risks. Overall, this study provides insight into the potential role of cryptocurrencies as a safe haven during times of market turbulence.
References
• Aslanidis N.,BarivieraA-F., Martínez-Ibañez O., (2019). An analysis of cryptocurrencies conditional crosscorrelations.Finance Research Letters, 31, 130-137.
• Akoum, I.,Graham, M., Kivihaho, J.,Nikkinen, J.,andOmran, M., (2012).Co-movement of oil and stock prices in the GCC region: A wavelet analysis.The Quarterly Review of Economics and Finance,52, (4), 385-394.
• Baur, D.G., Lucey, B.M., (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. The Financial. Review. 45 (2), 217–229.
• Baur, D.G., & McDermott, T.K., (2010). Is gold a safe-haven? International evidence. Journal of Banking & Finance, 34, 1886–1898.
• Beckmann, J., Berger, T., Czdaj, R., 2015. Does Gold Act As a Hedge or a Safe Haven for Stocks?A Smooth Transition Approach.Economic Modelling, 48, 16-24.
• Basher, S.,Sadorsky, P., (2016).Hedging emerging market stock prices with oil, gold, VIX, and bonds: A comparison between DCC, ADCC and GO-GARCH.Energy Economics,54, (C), 235-247.
• Bouri, E., Molnar, P., Azzi, G., Roubaud, D., Hagfors, L., (2017). On the hedge and safe haven properties of Bitcoin: is it really more than a diversifier? Finance Research Letters, 20, 192–198.
• CharfeddineL., BenlaghaN., MaouchiY., 2020. Investigating the dynamic relationshipbetween cryptocurrencies and conventional assets: Implications for financial investors. Economic Modelling, 85, 198-217.
• Chkili, W., (2016) Dynamic correlations and hedging effectiveness between gold and stock markets: evidence for BRICS countries. Research in International Business and Finance, 38, 22–34.
• Dyhrberg, A.H., (2016). Hedging capabilities of Bitcoin. Is it the virtual gold? Finance Research Letters, 16, 139–144.
