Can Bitcoin hedge Belt and Road equity markets?

Yezhou Sha and Weijia Song

Finance Research Letters, 2021, vol. 42, issue C

Abstract: We use the Belt and Road Initiative (BRI) economies to assess whether co-movements between individual BRI countries’ equity markets and Bitcoin, can optimize portfolio composition. The dynamic correlations between these two asset classes persist up to 21 days out-of-sample. During the Covid-19 pandemic, a simple hedging strategy could have improved high risk-averse investors’ utility, while still yielding positive returns after controlling for transaction costs. The distribution of hedge ratios and portfolio performance of a Bitcoin-BRI country hedged portfolio flattens after the country joins the BRI, indicating further research is needed to identify the underlying mechanism at work.

Keywords: DCC–GARCH; Bitcoin; Belt and Road Initiative; Hedging; Portfolio analysis (search for similar items in EconPapers)
JEL-codes: C32 G11 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321002105
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321002105

DOI: 10.1016/j.frl.2021.102129

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().