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; Bond University

Kenneth Szulczyk

Curtin University, Malaysia; Xiamen University Malaysia

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 Szulczyk, 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

Bond University ( email )

Gold Coast, QLD 4229
Australia

Kenneth Szulczyk

Curtin University, Malaysia ( email )

CDT 250
Sarawak
Miri, Sarawak 98009
Malaysia

Xiamen University Malaysia ( email )

Malaysia

HOME PAGE: http://www.xmu.edu.my

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
875
Abstract Views
5,204
rank
594,797
PlumX Metrics