A Safe Haven Index
35 Pages Posted: 2 Jul 2020 Last revised: 29 Oct 2020
Date Written: July 2, 2020
Gold, U.S. and German government bonds, the Swiss franc and the U.S. dollar and, more recently, Bitcoin are frequently labeled safe havens. This paper proposes a safe haven index (SHI) to benchmark safe haven assets and demonstrates that the SHI exhibits positive returns and increased volatility in crisis periods. Gold has a high safe haven beta and high risk, whereas 10-year U.S. and German government bonds have smaller betas and lower risk. In contrast, Bitcoin has a high alpha and an insignificant beta making it a "lucky safe haven''. Finally, a specific analysis of the COVID-19 shock in March 2020 reveals that the safe haven index turned briefly negative, contrasting previous crises over the last 40 years.
Keywords: safe haven, gold, government bonds, Bitcoin, COVID-19, safe assets, volatility
JEL Classification: C43, G01, G11, G12, G15
Suggested Citation: Suggested Citation