Is the renminbi a safe-haven currency? Evidence from conditional coskewness and cokurtosis

Xin Cheng, Hongyi Chen and Yinggang Zhou

Journal of International Money and Finance, 2021, vol. 113, issue C

Abstract: We examine whether the renminbi (RMB) is a safe-haven currency in terms of its effectiveness in hedging financial stress for global equity investors. The coskewness of the RMB (the covariance between the RMB premium and equity volatility) is mostly negative, implying that the RMB is not a good hedge in times of market volatility. Moreover, the positive cokurtosis of the RMB (the covariance between the RMB premium and equity skewness) implies that the RMB is unable to hedge against stock market crashes. Neither the coskewness nor the cokurtosis of the RMB is priced, suggesting that equity investors with skewness and kurtosis preferences would not use the RMB to hedge against financial stress. Therefore, the RMB is not yet a safe-haven currency.

Keywords: Currency hedging; Conditional coskewness; Conditional cokurtosis; Idiosyncratic skewness; International asset pricing (search for similar items in EconPapers)
JEL-codes: G11 G12 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 (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:113:y:2021:i:c:s0261560621000085

DOI: 10.1016/j.jimonfin.2021.102359

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