Cryptocurrency Safe Haven Property against Indonesian Stock Market During COVID-19

Safe-haven assets conserve their value or grow against another asset or portfolioduring market turmoil. Indonesian stock market, represented by the Jakarta composite index (JKSE), plunged in price because of COVID-19, pushing investors to look for safe-havens. The cryptocurrency began to be perceived as a store of value as indicated by the transaction volume increase; hence it was expected to be a safe haven asset. However, cryptocurrency’s high price volatility cast doubts on its store of value effectiveness, prompting inspection for its safe haven property as well. This research aimed to predict the assets' risk and return plus investigate whether cryptocurrency is safe haven assets against the Indonesian stock market during COVID- 19. Daily closing prices of JKSE, Bitcoin, Ethereum, Litecoin, and Ripple were used, then the GARCH model was implemented in the forecasting. DCC-GARCH model, followed by dummy variable regression, will be applied to the return data to evaluate the safe haven property. The prediction projected Bitcoin as the most profitable asset andRipple as the riskiest. The analysis and robustness test suggested that none of these cryptocurrencies were safe haven assets during the whole observation. This indicates that investors who intend to seek safe haven investments were advised against investing in these cryptocurrencies

The relationship between global risk aversion and returns from safe-haven assets

We investigate the relationship between global risk aversion and safe-haven assets using the causality-in-quantiles test and the quantile-on-quantile regression method. Our empirical results show the predictability of global risk aversion on the returns of safe-haven assets. Furthermore, we find that several assets have consistent safe haven attributes regardless of the level of global risk aversion, while gold and Bitcoin cannot be considered consistent safe havens. Based on these findings, non-cash flow-induced shocks are not only an important predictor of asset returns but also their relevance cuts across general financial markets

Optimal risk computation on precious metal’s assets diversification

Optimization is the selection of a best element with regards to certain criterion from set of available alternatives. This paper investigates the effects of assets in optimizing risk using diversification strategy and also examines gold quality of hedging and safe haven. The reduction strength of assets is estimated. Hence, it is observed that gold exhibits highest risk reduction strength. Also it is noticed that gold acts as hedge and safe haven for investors during economic recession

Geopolitical Risk And Responses To Financial Markets

The Geopolitical risk (GPR) generated by the Russian invasion of Ukraine has triggered various impacts and responses in terms of financial markets and investors’ sentiments regarding sensible actions. The purpose of this study was to focus on GPR and responses to financial assets and commodities using a vector autoregressive (VAR) model. The results uncovered differences in the various responses of financial assets and commodities in different durations. It was found that under increasing GPR, gold is a safe haven for energy commodities, while bitcoin is safe haven for the capital market, and treasury bonds and US dollars are a safe haven for other various financial assets as well as commodities such as energy. Since gold’s behavior is determined by itself, investment in gold can help reduce risk in portfolios when there is an increase in geopolitical risk and at times of a bearish market

ARE STABLECOINS SAFE HAVENS FOR TRADITIONAL CRYPTOCURRENCIES? AN EMPIRICAL STUDY DURING THE COVID-19 PANDEMIC

We investigate whether stablecoins are safe havens for traditional cryptocurrencies with fresh evidence from the recent crisis period of the COVID-19 pandemic. Our results support the safe-haven properties of Tether for both before and during the pandemic. For Digix, a gold-backed stablecoin with relatively small market capitalization, we find a change in characteristics before and during the pandemic, but do not find statistically significant evidence for its safe-haven properties. Furthermore, we document that, when considering the economic benefits and costs of adding safe-haven assets into cryptocurrency portfolios, the one with Tether outperforms both a naked portfolio and the portfolio with a traditional safe-haven asset such as gold

Safe haven investment during turbulent conditions in Indonesia and Philippines capital market

Haven investment is a safe and profitable asset for investors during turbulent capital market conditions. Investors tend to divert investment in shares owned to safe-haven assets to secure investment value during the decline in value on the stock market. This study aims to obtain empirical evidence related to the ability of gold as a safe-haven investment in the State of Indonesia and the ability of gold as a safe-haven investment in the Philippines. The data used in this study is a daily return from the period January 1, 2018, to February 20, 2020. Data analysis techniques used in this study use the Augmented Dickey-Fuller (ADF) stationary test and the quantile regression analysis test with a quintile rate of 50%, 40%, 30%, 20%, and 10%. The results show that gold is a haven investment in Indonesia. Gold is a haven investment in the Philippines

Navigating Uncertainty: The Role of Digital Assets

This research studies the dynamic connectedness among digital assets proxied by non-fungible tokens (NFTs), Islamic cryptocurrencies, and conventional cryptocurrencies with the US Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) indices. We also examine the hedge and safe haven properties of the aforementioned digital assets against the uncertainties. Using wavelet coherence analysis from 19 January 2018 to 31 October 2023, we show that NFTs react heterogeneously to changes in uncertainties while cryptocurrency reacts inversely. NFTs and conventional cryptocurrencies can only act as diversifiers, but neither as a hedge nor a safe haven against uncertainties. However, Islamic cryptocurrencies have the potential to act as both a hedge and a safe haven against uncertainties. Our findings shed light on the role of emerging digital assets in formulating investment strategies and ensuring stability in the financial markets. Originality/Value: Given the immense potential of digital assets, a remaining research gap concerns their interplay with uncertainty. In other words, given the presence of extreme market turmoil over recent years, no consensus is present in terms of highlighting the dynamic co-movement between digital assets such as NFT, Islamic cryptocurrencies, and global uncertainty factors. In addition to that, the lead-lag relationship among digital assets and uncertainties are also unknown till date. The current study fills this gap by providing robust evidence

Connectedness between DeFi, cryptocurrency, stock, and safe-haven assets

This paper examines return spillovers within and between different DeFi, cryptocurrency, stock, and safe-haven assets. For the period January 2019 to March 2022, we find that DeFi and cryptocurrency asset markets exhibit strong within-market and between-market return spillovers, that stock and safe-haven markets show weak connectedness, and that safe-haven assets are minor receivers and transmitters of between-market spillover effects. The connectedness between markets is time-varying and reveals structural changes in early 2020. Furthermore, we document that financial conditions shape the dynamics of return spillover effects between marketsWe would like to thank two anonymous reviewers for constructive and insightful comments. Juan C. Reboredo acknowledges financial support provided by the Agencia Estatal de Investigación (Ministerio de Ciencia, Innovación y Universidades) under research project with reference PID2021–124336OB-I00 co-funded by the European Regional Development Fund (ERDF/FEDER)S

New haven: an empirical qualification of bitcoin among flight-to-safety assets in the face of Covid-19 pandemic

This paper uses the Covid-19crisisto assess whether crypto currencies show “safe haven” properties or not. By analyzing the CBOE-Volatility-Index I derive the breaking-point of the crisis to be the 18th-March-2020. I present evidence that Bitcoin, as cryptocurrencies’ main representative, fails to act as a “safe haven”, throughout a set of correlation and regression analysis. Moreover, I find that also traditional “safe haven” assets do not meet expectations. I present a possible cause, with the presence of strong financial contagion rooted in the novelty of the crisis. Asness’ Quality-Minus-Junk is the only asset that showed negative correlation with the market during the financial turmoil

Foreign investors and risk shocks: seeking a safe haven or running for the exit?

In this paper we study the impact of shocks to global risk and global risk aversion (such as Lehman) as well as shocks with a more idiosyncratic nature (such as the euro debt crisis) on cross border portfolio flows, taking the perspective of foreign investors. We find robust evidence of systematic portfolio outflows in the wake of both types of shocks. There are no securities which are consistently safe haven assets, namely experiencing portfolio inflows when risk is on the rise or perceived to be high. Nevertheless, especially money market instruments issued by the US, euro area low-yield countries and Japan, as well as securities issued in Switzerland have behaved as safe haven assets in specific episodes or following changes in certain risk measures. We also find that the role of US-based crises and risk shocks is special, with the US not necessarily experiencing portfolio outflows or even attracting inflows for short-term dated securities, as a safe haven country, in those episodes