Are Islamic indexes, Bitcoin and gold, still “safe-haven” assets during the COVID-19 pandemic crisis?

Abstract

Purpose This paper aims to investigate whether Islamic indexes, Bitcoin and gold still act as hedges or/and “safe-haven” assets during the COVID-19 pandemic crisis. This paper examines the role of the Morgan Stanley Capital International all-country world index, Islamic index, gold and Bitcoin as a hedge or safe-haven asset for the world conventional stock market over the period from April 30, 2015 to March 27, 2020. Design/methodology/approach In this paper, the authors re-evaluate the hedge and safe haven properties of Islamic indexes, gold and Bitcoin following Baur and Lucey’s (2010) and Baur and McDermott’s (2010) methodology. Findings Empirical results show that the Islamic index is not a hedge or a safe haven asset for the world conventional stock market during the recent coronavirus crisis period. Different from the whole period, the authors find that gold is a strong hedge but only a weak safe or is not a safe haven during the coronavirus sub-period. Bitcoin reports distinctive properties, as it acts as a weak hedge and not a safe-haven asset. Originality/value This paper is the first study that investigates whether the global Islamic index still acts as hedges or “safe-haven” assets during the new COVID-19 crisis period. The results can help investors make informed decisions when adding cryptocurrencies and Islamic indexes to their portfolios during the coronavirus crisis.

Do Ṣukūk and Islamic indexes act as safe refuge to conventional stock markets? Evidence from Markov-switching CAPM approach

“…(2022), Arif et al. (2022), Ben Haddad and Trabelsi (2021) and Bahloul et al. (2022), according to which Islamic indexes do not provide a haven of safety during the COVID-19 pandemic.…”

Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

“…Based on the results of EPU and VIX, it can be surmised that investors' behavior in the stock and cryptocurrency markets during the pandemic is rational and not entirely driven by panic investing due to fear of COVID-19. The results also confirm the earlier findings that Bitcoin and Ethereum lose their safe haven properties against stocks during heightened market uncertainties [2,9,13]. Since market uncertainties have less definitive impacts on stock-Ethereum comovements, Ethereum is found to be better than Bitcoin in hedging or diversifying the G7 stocks during this pandemic crisis.…”

“…Other studies have found that the safe haven quality of the cryptocurrencies reduces to a weak hedge or diversifier [1,8,9] during the pandemic, making these digital assets less applicable to the investors' spree for safety. Bahloul et al [13] have found a behavioral shift in Bitcoin investment against the conventional MSCI world stock index during the pandemic (from 1 January 2020 to 27 March 2020), but so do the Islamic index and gold. Ji et al [1] tested Bitcoin and other traditional safe haven assets (i.e., gold, foreign currency, and commodities) against the MSCI US, Europe, and China indices.…”

“…Given this background, this paper contributes to the existing literature on portfolio management and behavioral finance during high market uncertainties in the following ways. Most studies have examined hedging or safe haven properties of the cryptocurrencies based on their comovements with various financial assets and commodities during the pandemic [3,8,9,13]. Others have investigated the properties of cryptocurrencies based on their relationship with market uncertainty measures [10,[14][15][16] and government responses to COVID-19 [17,18].…”

Fintech in islamic finance literature: A review

“…In contrast with the previous studies, a research by Bahloul et al (2021) ascertained that during the COVID-19 crisis period, bitcoin and Islamic stock indexes had a similar volatility pattern, and the two types of investment instruments did not offer safe-haven investment. Hence, it can be concluded that bitcoin has a similar characteristic with other investment instruments, and the massive amount of information related to bitcoin will gradually decrease the Muslim perspective regarding the uncertainty (gharar) of bitcoin.…”