 Cryptocurrencies against stock market risk: New insights into hedging effectivenessMałgorzata Just and Krzysztof Echaust Research in International Business and Finance, 2024, vol. 67, issue PA Abstract: This study examines the role of cryptocurrencies as a hedging and safe-haven instrument against stock market risk. Employing five of the largest cryptocurrencies by market capitalization: BTC, ETH, BNB, ADA, and XRP, from 2017 to 2022 in a variance-optimal hedging framework we investigate and compare the hedging effectiveness of cryptocurrencies for the developed G7 and emerging BRICS stock markets. Based on EVT we introduced a new approach to the assessment of hedging effectiveness. We found that the probability of at least 10-percent hedging effectiveness of Bitcoin is approximately equal to zero. The conditional probability that Bitcoin can reduce at least 10% of volatility given that index returns fall below the 1st percentile is higher and ranges from 2% to 28.4% depending on the stock market. The probabilities estimated for other cryptocurrencies are lower. We provide new and valuable knowledge for investors, who consider cryptocurrencies as a shelter for their investment portfolios. Keywords: Cryptocurrencies; Bitcoin; Safe haven; Hedging effectiveness; Stock markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:67:y:2024:i:pa:s027553192300260x DOI: 10.1016/j.ribaf.2023.102134 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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