Hedging nickel and copper commodities using bitcoin and gold: are they safe havens?

Seoung Ju Hong (), Jordan James O. Go (), Miles Patrice T. Villegas () and Julianna Nicole D. De Leon ()
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Seoung Ju Hong: De La Salle University
Jordan James O. Go: De La Salle University
Miles Patrice T. Villegas: De La Salle University
Julianna Nicole D. De Leon: De La Salle University

SN Business & Economics, 2024, vol. 4, issue 9, 1-29

Abstract: Abstract The Philippine economy exports substantial amounts of nickel and copper to neighboring nations, and economic and political uncertainties continuously heighten the asset’s volatility. Therefore, there exists a demand for a safe haven where Philippine exporters may utilize risk-reduction instruments. The study determines if Bitcoin and gold are a safe haven, hedge, or diversifier for nickel and copper to provide accessible hedging instruments that could potentially offset extreme price risks. The study employs the daily logarithmic returns of the S&P Price Indices of gold, Bitcoin, nickel, and copper from 2014 to 2023 (N = 2516). Parametric models (i.e., DCC-GARCH, ADCC-GARCH, and ADCC-GJR-GARCH) and non-parametric models (i.e., QQ Regression and Wavelet Coherence Analysis) were applied to take into factor the robustness of more recent methodologies in addressing the heterogeneity problem. The study found that parametric methodologies classify Bitcoin and gold primarily as diversifiers, yet non-parametric methodologies identified specific instances of safe haven and hedging capabilities with the Wavelet Coherence analysis. Thus, studies must constantly search for suitable financial assets that might serve as safe havens or hedges to protect Philippine exporters in the interim till the establishment of an official financial derivatives market.

Keywords: Hedging; Safe havens; Wavelet coherence analysis; Diversifiers; Commodity hedging (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s43546-024-00708-4

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