The 2008 Global Financial Crisis and COVID-19 Pandemic: How Safe are the Safe Haven Assets?

Covid Economics, Vetted and Real-Time Papers, Issue 34, pp. 88-115, 2020

33 Pages Posted: 5 Jul 2020

See all articles by Muhammad A. Cheema

Muhammad A. Cheema

University of Otago New Zealand

Robert W. Faff

University of Queensland

Kenneth Szulczuk

Xiamen University Malaysia Campus

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2020

Abstract

This paper compares the performance of safe haven assets during two stressful stock market regimes – the 2008 Global Financial Crisis (GFC) and COVID-19 pandemic. Our analysis across the ten largest economies in the world shows that the traditional choice, gold, acts as a safe haven during the GFC but fails to protect investor wealth during COVID. Our results suggest that investors might have lost trust in gold. Furthermore, silver does not serve as a safe haven during either crisis, while US Treasuries and the Swiss Franc generally act as strong safe havens during both crises. The US dollar acts as a safe haven during the GFC for all the countries except for the United States, but only for China and India during COVID. Finally, Bitcoin does not serve as a safe haven for all countries during COVID; however, the largest stablecoin, Tether, serves as a strong safe haven. Thus, our results suggest that, during a pandemic, investors should prefer liquid and stable assets rather than gold.

Keywords: COVID-19, 2008 GFC, gold, safe haven, stablecoin, bitcoin

JEL Classification: D8, G01, G10, G11, G14, G14

Suggested Citation

Cheema, Muhammad A. and Faff, Robert W. and Szulczuk, Kenneth, The 2008 Global Financial Crisis and COVID-19 Pandemic: How Safe are the Safe Haven Assets? (July 3, 2020). Covid Economics, Vetted and Real-Time Papers, Issue 34, pp. 88-115, 2020, Available at SSRN: https://ssrn.com/abstract=3642945 or http://dx.doi.org/10.2139/ssrn.3642945

Muhammad A. Cheema (Contact Author)

University of Otago New Zealand ( email )

Dunedin, 9016
New Zealand

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Kenneth Szulczuk

Xiamen University Malaysia Campus ( email )

Malaysia

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