Hedge and safe-haven properties of Cryptocurrencies: evidence in east asia-5 market

Tan, Chiang-Ching; Ling, Pick-Soon; Sim, Siew-Ling; Ming, Kelvin Lee Yong

doi:10.1080/23322039.2023.2183640

Cited by 4 publications

(7 citation statements)

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“…(2019) and Tan et al (2023), who have proposed that cryptocurrencies can act as safe-haven assets for stock indices across the globe. On the other hand, stable cryptocurrencies show a nearly zero or negative correlation with the studied stock returns during the study periods.…”

Section: Resultsmentioning

confidence: 99%

Section: Empirical Studies On the Hedge And Safe Haven Properties Of ...mentioning

confidence: 99%

“…Researchers conclude by recommending market cap coins to individual investors due to their greater omega ratio. Further, utilizing the MGARCH approach, Tan et al (2023) have discovered that the hedge and safe haven capacities of cryptocurrencies vary from market to market. Researchers have noted that digital currencies can function as a potent hedge for the East Asia‐5 stock markets, while Bitcoin and Litecoin exhibit safe haven characteristics for the Japanese equity market.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Cryptocurrencies work on decentralized networks powered by blockchain technology, as opposed to traditional financial assets controlled by third parties, such as a government or central bank. Because of this unique quality, cryptocurrencies have gained allure among those wary of centralized financial systems (Bouri et al, 2020; Demiralay & Bayraci, 2021; Tan et al, 2023). The potential for high returns is yet another crucial element that has fuelled the growth of cryptocurrencies (Qureshi et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

“…Several recent studies have examined cryptocurrencies' role in the stock market during economic downturns (Bouri et al, 2020; Fakhfekh et al, 2022; Gil‐Alana et al, 2020; Jana et al, 2023; Jiang et al, 2021; Li & Meng, 2022; Sajeev & Afjal, 2022; Tan et al, 2023). Some studies suggest that digital currency returns are delinked from stock returns (Kumaran, 2022), highlighting the potential for cryptocurrencies to diversify equity market risk (Balcilar et al, 2022; Ghorbel et al, 2022b; Sami & Abdallah, 2021), offer hedging (Bouri et al, 2020; Jiang et al, 2021), and provide safe haven benefits against market falls (Li & Miu, 2022).…”

Section: Introductionmentioning

confidence: 99%

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Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approach

Jana,

Sahu

2023

Economic Notes

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This study analyses six major cryptocurrencies and four global stock markets to explore the role of cryptocurrencies as a hedge, safe haven, and diversifier in stock markets. The study employs ADCC‐GARCH and Wavelet Coherence Technique, using daily data from 4 January 2017 to 28 February 2023. The study has found that stock returns and unstable cryptocurrency returns have high volatility persistence in the long run. Besides, while unstable digital currencies (Bitcoin, Ethereum, Binance Coin, and Dogecoin) serve as a hedge during stable economic periods, they have not been a hedge during economic turmoil in the stock markets. Conversely, stablecoins (Tether and USD Coin) have been shown to have acted as a hedge during normal economic times and have offered a safe haven during economic downturns. Except for Tether, all cryptocurrencies' diversification capacity is time‐varying. In stable economic conditions, they serve as diversifiers, but during turmoil, they do not. However, Tether serves as a diversifier regardless of the financial situation. Finally, the present investigation is expected to offer crucial information on hedge, safe haven and diversification for quasi‐investors.

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Section: Resultsmentioning

confidence: 99%

Section: Empirical Studies On the Hedge And Safe Haven Properties Of ...mentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approach

Jana,

Sahu

2023

Economic Notes

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A wavelet analysis of investing in cryptocurrencies in the Indian stock market

Jana,

Sahu

2024

IJOEM

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PurposeThis study is designed to examine the dynamic interrelationships between four cryptocurrencies (Bitcoin, Ethereum, Dogecoin and Cardano) and the Indian equity market. Additionally, the study seeks to investigate the potential safe haven, hedge and diversification uses of these digital currencies within the Indian equity market.Design/methodology/approachThis study employs the wavelet approach to examine the time-varying volatility of the studied assets and the lead-lag relationship between stocks and cryptocurrencies. The authors execute the entire analysis using daily data from 1st October 2017 to 30th September 2023.FindingsThe result of the study shows that financial distress due to the pandemic and the Russian invasion of Ukraine have a negative effect on the Indian equities and cryptocurrency markets, escalating their price volatility. Also, the connectedness between the returns of stock and digital currency exhibits a strong positive relationship during periods of financial distress. Additionally, cryptocurrencies serve as a tool of diversification or hedging in the Indian equities markets during normal financial circumstances, but they do not serve as a diversifier or safe haven during periods of financial turmoil.Originality/valueThis study contributes to understanding the relationship between the Indian equity market and four cryptocurrencies using wavelet techniques in the time and frequency domains, considering both normal and crisis times. This can offer valuable insights into the potential of cryptocurrencies inside the Indian equities markets, mainly with respect to varying financial conditions and investment horizons.

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Do cryptocurrency investors in the UK need more protection?

Wang

2024

JFRC

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Purpose The existing literature offers various perspectives on integrating cryptocurrencies into investment portfolios; yet, there is a gap in understanding the behaviours, attitudes and cross-investment links of individual investors. This study, grounded in the modern portfolio theory and the random walk theory, aims to add empirical insights that are specific to the UK context. It explores four hypotheses related to the influence of socio-demographics, digital adoption, cross-investment behaviours and financial attitudes on cryptocurrency owners. Design/methodology/approach This study uses a logistic regression model with secondary data from the Financial Lives Survey 2020 to assess the factors impacting cryptocurrency ownership. A total of 29 variables are used, categorized into four groups aligned with the hypotheses. Additionally, hierarchical clustering analysis was conducted to further explore the cross-investment links. Findings The study reveals a significant lack of diversification among UK cryptocurrency investors, a pronounced inclination towards high-risk investments such as peer-to-peer lending and crowdfunding, and parallels with gambling behaviours, including financial dissatisfaction and a propensity for risk-taking. It highlights the influence of demographic traits, risk tolerance, technological literacy and emotional attitudes on cryptocurrency investment decisions. Originality/value This study provides valuable insights into cryptocurrency regulation and retail investor protection, underscoring the necessity for tailored financial education and a holistic regulatory approach for investment products with comparable risk levels, with the aim of minimizing regulatory arbitrage. It significantly enhances our understanding of the unique dynamics of cryptocurrency investments within the evolving financial landscape.

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Hedge and safe-haven properties of Cryptocurrencies: evidence in east asia-5 market

Cited by 4 publications

References 46 publications

Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approach

Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approach

A wavelet analysis of investing in cryptocurrencies in the Indian stock market

Do cryptocurrency investors in the UK need more protection?

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