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

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: 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