Bitcoin is not the New Gold - A Comparison of Volatility, Correlation, and Portfolio Performance
Tony Klein and
Hien Pham Thu
No 1812, Working Papers on Finance from University of St. Gallen, School of Finance
Cryptocurrencies such as Bitcoin are establishing themselves as an investment asset and are often named the New Gold. This study, however, shows that the two assets could barely be more di?erent. Firstly, we analyze and compare conditional variance properties of Bitcoin and Gold as well as other assets and ?nd di?erences in their structure. Secondly, we implement a BEKK-GARCH model to estimate time-varying conditional correlations. Gold plays an important role in ?nancial markets with ?ight-to-quality in times of market distress. Our results show that Bitcoin behaves as the exact opposite and it positively correlates with downward markets. Lastly, we analyze the properties of Bitcoin as portfolio component and ?nd no evidence for hedging capabilities. We conclude that Bitcoin and Gold feature fundamentally di?erent properties as assets and linkages to equity markets. Our results hold for the broad cryptocurrency index CRIX. As of now, Bitcoin does not re?ect any distinctive properties of Gold other than asymmetric response in variance.
Keywords: BEKK; Bitcoin; CRIX; Cryptocurrency; Gold; GARCH; Conditional Correlation; Asymmetry; Long memory (search for similar items in EconPapers)
JEL-codes: C10 C58 G11 (search for similar items in EconPapers)
Pages: 27 pages
New Economics Papers: this item is included in nep-pay and nep-rmg
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Journal Article: Bitcoin is not the New Gold – A comparison of volatility, correlation, and portfolio performance (2018)
Working Paper: Bitcoin is not the New Gold - A Comparison of Volatility, Correlation, and Portfolio Performance (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2018:12
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