On the safe-haven and hedging properties of Bitcoin: new evidence from COVID-19 pandemic

Wafa Abdelmalek and Noureddine Benlagha

Journal of Risk Finance, 2022, vol. 24, issue 2, 145-168

Abstract: Purpose - This study aims to investigate the safe-haven and hedging properties of Bitcoin against a wide variety of conventional assets before and during the coronavirus disease 2019 (COVID-19) pandemic. Design/methodology/approach - This paper uses a smooth transition regression (STR) to jointly test the hedging properties of Bitcoin in normal conditions and Bitcoin's safe-haven properties in extreme stock market conditions. Findings - Highlighting the results, the authors show that Bitcoin is able to provide safe-haven feature during the COVID-19 pandemic period while Bitcoin serves as a hedge tool in the pre-COVID-19 pandemic period. The findings also show that the prowess of the safe-haven/hedge nature is sensitive to the type of the asset market and the time horizon when switching from daily to weekly frequency data. Originality/value - This is one of the first studies that conduct a combined analysis of the safe-haven and hedging capabilities of Bitcoin against several asset classes using an STR method. This study uses the longest sample period to yet, allowing researchers to examine Bitcoin's safe-haven and hedging features both before and after the COVID-19 pandemic.

Keywords: Bitcoin; Safe-haven; Hedge; COVID-19; Smooth transition regression (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-06-2022-0153

DOI: 10.1108/JRF-06-2022-0153

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