Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis

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Publisher: Elsevier Advanced Technology Publications
Document Type: Report
Length: 332 words

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Keywords Gold; Commodities; Bitcoin; Stock indices; Safe haven; Wavelets VaR Highlights * Study Bitcoin, gold, and commodities as safe havens for various stock indices. * Apply wavelet coherency approach and assess diversification with wavelet VaR. * Bitcoin/gold/commodities and stocks are weakly dependent at various time scales. * Benefits of diversification vary in the time-frequency space. * Bitcoin is the least dependent and exhibits a superiority over gold and commodities. Abstract In this study, we compare the safe-haven properties of Bitcoin, gold, and the commodity index against world, developed, emerging, USA, and Chinese stock market indices for the period 20 July 2010--22 February 2018. We apply the wavelet coherency approach and show that the overall dependence between Bitcoin/gold/commodities and the stock markets is not very strong at various time scales, with Bitcoin being the least dependent. We study the diversification potential at the tail of the return distribution through wavelet value-at-risk (VaR) and reveal that the degree of co-movement between gold and stock returns affects the portfolio's VaR level. Specifically, the benefits of diversification vary in the time-frequency space, with Bitcoin exhibiting a superiority over both gold and commodities. Our findings are useful for investors and financial advisors searching for the best asset among Bitcoin, gold, and commodities to hedge extreme negative movements in stock market indices, while accounting for the heterogeneity in the horizons of investors. Author Affiliation: (a) USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon (b) Montpellier Business School, Montpellier, France (c) South Ural State University, 76, Lenin prospekt, Chelyabinsk, Russia (d) Center for Energy and Sustainable Development, Montpellier Business School, Montpellier, France (e) Faculty of Social Sciences, Institute of Economic Studies, Charles University in Prague, Czech Republic (f) Trinity Business School, Trinity College Dublin, Dublin 2, Ireland * Corresponding author. Article History: Received 1 August 2019; Revised 13 November 2019; Accepted 21 March 2020 Byline: Elie Bouri [eliebouri@usek.edu.lb] (a), Syed Jawad Hussain Shahzad [j.syed@montpellier-bs.com] (b,c), David Roubaud [d.roubaud@montpellier-bs.com] (d), Ladislav Kristoufek [ladislav.kristoufek@fsv.cuni.cz] (e), Brian Lucey [blucey@tcd.ie] (f)

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Gale Document Number: GALE|A640607849