The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods

Salma Tarchella, Rabeh Khalfaoui and Shawkat Hammoudeh

Research in International Business and Finance, 2024, vol. 67, issue PB

Abstract: This study investigates the safe haven, hedging, and diversification properties of oil, gold, and two cryptocurrencies, including Bitcoin and Ethereum, for equity investments in the G7 economies under different market conditions. Daily data covering the pre- and post-COVID-19 periods were employed, using the linear and nonlinear Generalized Autoregressive Conditional Heteroskedasticity models. The empirical evidence supports gold as an undisputable diversifier for equity investments in the G7 equity markets under all market conditions. Cryptocurrencies have a valuable safe-haven potential, particularly during the COVID-19 crisis. Furthermore, the suitability of the optimal hedge asset depends on market conditions and individual countries, where the traditional assets present the best hedge in the normal conditions, compared to the modern assets. However, in the stress periods, Bitcoin presents the best hedge for the stocks of the G7 European and the UK countries, although Ethereum is the optimal hedge for the U.S. and Canada. In contrast, oil exhibits a superiority in hedging Japanese equities during all market conditions.

Keywords: Hedging; Cryptocurrencies; COVID-19 crisis; Oil and gold; Multivariate GARCH (search for similar items in EconPapers)
JEL-codes: C01 G01 G11 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:67:y:2024:i:pb:s0275531923002519

DOI: 10.1016/j.ribaf.2023.102125

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