Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets
Abstract This article investigates five safe-haven asset responses from 2014 to 2022, including the unprecedented COVID-19 crisis, Russian invasion of Ukraine, and sharp US interest rate increases of 2015 and 2022. We apply the unique approach of the multivariate factor stochastic volatility (MSV) m...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2024-03-01
|
| Series: | Financial Innovation |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s40854-023-00589-w |
| _version_ | 1797259085850083328 |
|---|---|
| author | Ewa Feder-Sempach Piotr Szczepocki Joanna Bogołębska |
| author_facet | Ewa Feder-Sempach Piotr Szczepocki Joanna Bogołębska |
| author_sort | Ewa Feder-Sempach |
| collection | DOAJ |
| description | Abstract This article investigates five safe-haven asset responses from 2014 to 2022, including the unprecedented COVID-19 crisis, Russian invasion of Ukraine, and sharp US interest rate increases of 2015 and 2022. We apply the unique approach of the multivariate factor stochastic volatility (MSV) model, which is extremely efficient for financial market analysis and allows us to conduct dynamic factor analysis of safe-haven relationships that cannot be observed directly. The research sample consists of five prospective safe-haven assets—gold, bitcoin, the euro, the Japanese yen, and the Swiss franc—and five primary world stock market indices—the S&P 500, Financial Times Stock Exchange (FTSE) 100, DAX, STOXX Europe 600, and Nikkei 225. Our findings are useful for investors searching for the best safe-haven assets among gold, bitcoin, and currencies to hedge against financial turmoil in global stock markets. Our unique findings suggest that safe-haven effects work differently for gold and the yen; that is, the Japanese yen acts as the strongest safe haven across all stock indices. Bitcoin is not a strong safe-haven currency since it has zero days of negative correlations with the considered stock indices, but it is a weak safe-haven during times of financial distress. Consequently, we state that strong and weak safe-haven properties vary across time and place. The novelty of our study lies in the methodological complexity of the MSV model (used for the first time to find the best safe-haven asset properties), dynamic factor analysis, a long-term research sample covering the Russian invasion of Ukraine in 2022, and an international investor perspective focusing on the world’s leading stock markets. We extend earlier studies by analyzing the interrelations of the world’s leading stock market indices with five potential safe-haven assets during the long period of 2014–2022 and using a unique dynamic factor analysis to show the differentiated behaviors of the Japanese yen and gold. Additionally, the main innovative contribution is a new framework of weak and strong safe-haven asset classifications not previously applied in the literature. |
| first_indexed | 2024-04-24T23:03:50Z |
| format | Article |
| id | doaj.art-8d669dff4ba74804a9faa65373f5bc14 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-04-24T23:03:50Z |
| publishDate | 2024-03-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-8d669dff4ba74804a9faa65373f5bc142024-03-17T12:35:41ZengSpringerOpenFinancial Innovation2199-47302024-03-0110112310.1186/s40854-023-00589-wGlobal uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock marketsEwa Feder-Sempach0Piotr Szczepocki1Joanna Bogołębska2Faculty of Economics and Sociology, Department of International Finance and Investment, University of LodzFaculty of Economics and Sociology, Department of Statistical Methods, University of LodzFaculty of Economics and Sociology, Department of International Business and Trade, University of LodzAbstract This article investigates five safe-haven asset responses from 2014 to 2022, including the unprecedented COVID-19 crisis, Russian invasion of Ukraine, and sharp US interest rate increases of 2015 and 2022. We apply the unique approach of the multivariate factor stochastic volatility (MSV) model, which is extremely efficient for financial market analysis and allows us to conduct dynamic factor analysis of safe-haven relationships that cannot be observed directly. The research sample consists of five prospective safe-haven assets—gold, bitcoin, the euro, the Japanese yen, and the Swiss franc—and five primary world stock market indices—the S&P 500, Financial Times Stock Exchange (FTSE) 100, DAX, STOXX Europe 600, and Nikkei 225. Our findings are useful for investors searching for the best safe-haven assets among gold, bitcoin, and currencies to hedge against financial turmoil in global stock markets. Our unique findings suggest that safe-haven effects work differently for gold and the yen; that is, the Japanese yen acts as the strongest safe haven across all stock indices. Bitcoin is not a strong safe-haven currency since it has zero days of negative correlations with the considered stock indices, but it is a weak safe-haven during times of financial distress. Consequently, we state that strong and weak safe-haven properties vary across time and place. The novelty of our study lies in the methodological complexity of the MSV model (used for the first time to find the best safe-haven asset properties), dynamic factor analysis, a long-term research sample covering the Russian invasion of Ukraine in 2022, and an international investor perspective focusing on the world’s leading stock markets. We extend earlier studies by analyzing the interrelations of the world’s leading stock market indices with five potential safe-haven assets during the long period of 2014–2022 and using a unique dynamic factor analysis to show the differentiated behaviors of the Japanese yen and gold. Additionally, the main innovative contribution is a new framework of weak and strong safe-haven asset classifications not previously applied in the literature.https://doi.org/10.1186/s40854-023-00589-wBitcoinGlobal uncertaintiesGoldHedgingReserve currenciesSafe haven |
| spellingShingle | Ewa Feder-Sempach Piotr Szczepocki Joanna Bogołębska Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets Financial Innovation Bitcoin Global uncertainties Gold Hedging Reserve currencies Safe haven |
| title | Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets |
| title_full | Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets |
| title_fullStr | Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets |
| title_full_unstemmed | Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets |
| title_short | Global uncertainty and potential shelters: gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets |
| title_sort | global uncertainty and potential shelters gold bitcoin and currencies as weak and strong safe havens for main world stock markets |
| topic | Bitcoin Global uncertainties Gold Hedging Reserve currencies Safe haven |
| url | https://doi.org/10.1186/s40854-023-00589-w |
| work_keys_str_mv | AT ewafedersempach globaluncertaintyandpotentialsheltersgoldbitcoinandcurrenciesasweakandstrongsafehavensformainworldstockmarkets AT piotrszczepocki globaluncertaintyandpotentialsheltersgoldbitcoinandcurrenciesasweakandstrongsafehavensformainworldstockmarkets AT joannabogołebska globaluncertaintyandpotentialsheltersgoldbitcoinandcurrenciesasweakandstrongsafehavensformainworldstockmarkets |