Is Bitcoin a safe haven? Application of FinTech to safeguard Australian stock markets

Muhammad Kamran, Pakeezah Butt, Assim Abdel-Razzaq and Hadrian Geri Djajadikerta

Studies in Economics and Finance, 2021, vol. 39, issue 3, 386-402

Abstract: Purpose - This study aims to address the timely question of whether Bitcoin exhibited a safe haven property against the major Australian stock indices during the first and second waves of the COVID-19 pandemic in Australia and whether such property is similar or different in one year time from the first wave of the COVID-19. Design/methodology/approach - The authors used the bivariate Dynamic Conditional Correlation, Generalized Autoregressive Conditional Heteroskedasticity model, on the five-day returns of Bitcoin and Australian stock indices for the sample period between 23 April, 2011 and 19 April, 2021. Findings - The results show that Bitcoin offered weak safe haven and hedging benefits when combined in a portfolio with S&P/ASX 200 Financials index, S&P/ASX 200 Banks index or S&P/ASX 300 Banks index. In regard to the S&P/ASX All Ordinaries Gold index, the authors found Bitcoin a risky candidate with inconsistent safe haven and hedging benefits. Against S&P/ASX 50 index, S&P/ASX 200 index and S&P/ASX 300 index, Bitcoin was nothing more than a diversifier. The outset of the second COVID-19 wave, which was comparatively more severe than the first, is also reflected in the results with considerably higher correlations. Originality/value - There is a lack of in-depth empirical evidence on the safe haven capabilities of Bitcoins for various Australian stock indices during the first and second waves of the COVID-19 pandemic. The study bridges this void in research.

Keywords: Australian stock indices; Bitcoin; COVID-19; Cryptocurrencies; DCC-GARCH; FinTech; safe haven (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-05-2021-0201

DOI: 10.1108/SEF-05-2021-0201

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