Is Bitcoin a Safe Haven for Indian Investors? A GARCH Volatility Analysis

Sarika Murty, Vijay Victor and Maria Fekete-Farkas
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Sarika Murty: Department of Economics, CHRIST (Deemed to be University), Bangalore 560029, India
Vijay Victor: Accounting, Economics and Finance Area, T A Pai Management Institute, Manipal Academy of Higher Education, Manipal 576104, India
Maria Fekete-Farkas: Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, 2100 Godollo, Hungary

JRFM, 2022, vol. 15, issue 7, 1-13

Abstract: This paper attempts to understand the dynamic interrelationships and financial asset capabilities of Bitcoin by analysing several aspects of its volatility vis-a-vis other asset classes. This study aims to analyse the volatility dynamics of the returns of Bitcoin. An asymmetric GARCH model (EGARCH) is used to investigate whether Bitcoin may be useful in risk management and ideal for risk-averse investors in anticipation of negative shocks to the market (leverage effect). This paper also examines Bitcoin as an investment and hedge alternative to gold as well as NSE NIFTY using a multivariate DCC GARCH model. DCC GARCH models are also used to check whether correlation (co-movement) between the markets is time-varying, examine returns and volatility spillovers between markets and the effect of the outbreak of COVID-19 in India on the investigated markets. The results show that given the supply of Bitcoin is fixed, low returns realisation is equivalent to excess supply over demand wherein investors are selling off Bitcoin during bad times. The positive co-movement between Bitcoin and gold during the COVID-19 outbreak shows that investors perceived Bitcoin as a relatively safe investment. However, overall analysis shows that Bitcoin was not considered a safe hedge and an investment option by Indian investors during the study period.

Keywords: Bitcoin; gold; volatility spill over; DCC GARCH; EGARCH (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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