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Masao Kumamoto and Juanjuan Zhuo
''Hedge and safe haven status of Bitcoin: copula-DCC approach''
( 2021, Vol. 41 No.1 )
We investigate the financial assets status (diversifier, hedge and safe haven) of Bitcoin and gold against the world and U.S. stock markets. We employ the copula-DCC approach to consider the tail dependence between Bitcoin or gold return and stock return. Our results indicate that Bitcoin is a weak hedge against the world and U.S. stock markets, while gold is a diversifier against the world stock market, but a strong hedge against the U.S. stock market. We also estimate the dynamic conditional betas and find that the returns of Bitcoin and gold are not sensitive to changes in the value of market portfolio. Moreover, we employ the threshold model to investigate whether there exist contagion effects between Bitcoin or gold market and stock markets. Our results show that the increase in market uncertainty weakens the role of Bitcoin as a weak hedge and Bitcoin becomes a diversifier, while it changes the role of gold as a diversifier into a hedge or a safe haven. The above results mean that although Bitcoin is called as “new gold”, the financial assets status of Bitcoin and gold are different.
Keywords: Bitcoin, Hedge, Safe Haven, Contagion, Copula-DCC Model, Conditional Beta, Threshold Model
JEL: F3 - International Finance: General
Manuscript Received : May 09 2020 Manuscript Accepted : Mar 10 2021

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