How safe are the safe haven assets?

Kateryna Anatoliyevna Kopyl () and John Byong-Tek Lee ()
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Kateryna Anatoliyevna Kopyl: Reserve Bank of Australia
John Byong-Tek Lee: University of Auckland

Financial Markets and Portfolio Management, 2016, vol. 30, issue 4, No 4, 453-482

Abstract: Abstract The aim of this paper is to examine which of the assets commonly believed to be safe havens do, in fact, protect investors during periods of severe financial instability. Using a broad dataset of 32 assets over the period of 1964–2014, we examine the relationship of these assets with the US equity market during financial crises to determine which of them are safe havens for US investors, hedges, or speculations. We find that the US Treasuries and Japanese yen are the strongest safe haven investments in months characterized by large declines in market value or excessive volatility. We also document that the recent global financial crisis had significantly negative ramifications on the safe haven properties of many of these assets. Our out-of-sample analyses show that while, in general, predictive market exposures are negatively correlated with asset returns in strong market downturns, those of even the strongest safe haven assets are often statistically insignificant.

Keywords: Safe haven assets; Global financial crisis; Return correlation (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (33)

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DOI: 10.1007/s11408-016-0277-5

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