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The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods
Journal article   Peer reviewed

The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods

Salma Tarchella, Rabeh Khalfaoui and Shawkat Hammoudeh
Research in international business and finance, 102125
Oct 2023
DOI: https://doi.org/10.1016/j.ribaf.2023.102125
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

COVID-19 crisis cryptocurrencies Hedging Multivariate GARCH Oil and Gold
This study investigates the safe haven, hedging, and diversification properties of oil, gold, and two cryptocurrencies, including Bitcoin and Ethereum, for equity investments in the G7 economies under different market conditions. Daily data covering the pre- and post-COVID-19 periods were employed, using the linear and nonlinear Generalized Autoregressive Conditional Heteroskedasticity models. The empirical evidence supports gold as an undisputable diversifier for equity investments in the G7 equity markets under all market conditions. Cryptocurrencies have a valuable safe-haven potential, particularly during the COVID-19 crisis. Furthermore, the suitability of the optimal hedge asset depends on market conditions and individual countries, where the traditional assets present the best hedge in the normal conditions, compared to the modern assets. However, in the stress periods, Bitcoin presents the best hedge for the stocks of the G7 European and the UK countries, although Ethereum is the optimal hedge for the U.S. and Canada. In contrast, oil exhibits a superiority in hedging Japanese equities during all market conditions. [Display omitted] •Comparative analysis between traditional and digital currencies is conducted.•Several GARCH models are used to obtain the optimal hedging.•Results show that the GO-GARCH model is most preferred for forecasting the gold price.•Optimal hedge assets depend on market conditions and individual countries.•Cryptocurrencies have a valuable safe haven potential during the Covid-19 crisis.

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24 Record Views
49 citations in Web of Science
40 citations in Scopus

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#8 Decent Work and Economic Growth

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Collaboration types
Domestic collaboration
International collaboration
Web of Science research areas
Business, Finance
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