The hedge asset for BRICS stock markets: Bitcoin, gold or VIX

Abstract

We compare the weak/strong hedging abilities of three alternative assets, namely bitcoin, gold and US VIX futures, against the downside movements in BRICS stock market indices. Results from the cross-quantilogram approach indicate that bitcoin and gold are weak hedges. Analysis from the recursive sampling shows that each of bitcoin, gold and VIX futures has a time-varying hedging role in some BRICS countries, which has been shaped by the COVID-19 outbreak. Results from the conditional diversification benefits show appealing roles for the three alternative assets for investors in BRICS stock markets. However, gold appears to have higher and more stable diversification benefits in China, especially during the COVID-19 outbreak. Conversely, VIX futures offer higher diversification benefits in Brazil, Russia, India and South Africa during the abrupt of the COVID-19 outbreak.

Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

“…So in the light of these issues, this study models the reactions of major cryptocurrencies' returns in relation to panic and hysteria incited by This study adds to existing knowledge on three folds. First, it complements findings of recent studies on cryptocurrencies and COVID-19 (Demir et al, 2020;Vidal-Tom as, 2021;Yousaf et al, 2021;Shahzad et al, 2021;Naeem et al, 2021). The focus of recent studies has been directed towards the effect of the prevailing pandemic on stocks (Ozkan, 2021;Curto and Serrasqueiro, 2021;Nguyen et al, 2021;Chen et al, 2021;Mezhgan et al, 2021).…”

“…This has also been supported by Vidal-Tom as (2021) who showed recovery and stability of cryptocurrencies since the first wave of COVID-19 which peaked in March 2020. However, the other groups, including Shahzad et al (2021), Naeem et al (2021), Conlon et al (2020) and Kristoufek (2020), have revealed higher instability and negative returns in cryptocurrencies in comparison to major stock indices such as S&P 500. Majority of these studies have used number of deaths and cases to explain shocks in COVID-19 price volatility though they employed different estimation methods.…”

“…Kristoufek (2020) further amplifies this line of though by disputing the fact that Bitcoin can be a safe haven during crises rather gold does a better job than it. Using a cross-quantilogram approach, Shahzad et al (2021) further postulate that Bitcoin and gold are weaker assets in hedging COVID-19 risk as opposed to US VIX futures. This is ultimately supported by Naeem et al (2021), who employed MF-DFA to show that COVID-19 has adversely affected cryptocurrencies' efficiency with Bitcoin and Ethereum being hit the most.…”

“…groups reacts to this particular impulse. This was vital as cryptocurrencies and stocks are fundamentally different causing their returns to be uncorrelated (Shahzad et al, 2021). 4.1.1 BSVAR for cryptocurrencies.…”

“…Although cryptocurrencies were not originally created for investment purposes, investors have been increasingly incorporating them in their portfolios (Inci and Lagasse, 2019). This is because they may offer diversification advantages for investors with short investment horizons as attributed to the fact that their returns are not correlated with those of other asset classes (Shahzad et al, 2021). The growing popularity of cryptocurrencies has attracted the attention of investors, regulators and the general public.…”