On the Hedge and Safe Haven Properties of Bitcoin: Is it Really More than a Diversifier?

12 Pages Posted: 15 Oct 2016

See all articles by Elie Bouri

Elie Bouri

Université Saint Esprit de Kaslik (USEK)

Peter Molnár

University of Stavanger

Georges Azzi

Université Saint Esprit de Kaslik (USEK)

David Roubaud

Montpellier Business School

Lars Hagfors

Norwegian University of Science and Technology (NTNU)

Date Written: October 1, 2016

Abstract

This paper uses a dynamic conditional correlation model to examine whether Bitcoin can act as a hedge and safe haven for major world stock indices, bonds, oil, gold, the general commodity index and the US dollar index. Daily and weekly data span from July 2011 to December 2015. Overall, the empirical results indicate that Bitcoin is a poor hedge and is suitable for diversification purposes only. However, Bitcoin can only serve as a strong safe haven against weekly extreme down movements in Asian stocks. We also show that Bitcoin hedging and safe haven properties vary between horizons.

Keywords: Bitcoin, cryptocurrency, diversifier, hedge, safe haven, DCC

JEL Classification: G11, G15, Q02

Suggested Citation

Bouri, Elie and Molnár, Peter and Azzi, Georges and Roubaud, David and Hagfors, Lars, On the Hedge and Safe Haven Properties of Bitcoin: Is it Really More than a Diversifier? (October 1, 2016). Finance Research Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2846307

Elie Bouri

Université Saint Esprit de Kaslik (USEK) ( email )

KASLIK
Lebanon

Peter Molnár (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, 4036
Norway

Georges Azzi

Université Saint Esprit de Kaslik (USEK) ( email )

KASLIK
Lebanon

David Roubaud

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Lars Hagfors

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway

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