Bitcoin: Safe haven, hedge or diversifier? Perception of bitcoin in the context of a country’s economic situation — A stochastic volatility approach

Agata Kliber , Paweł Marszałek , Ida Musiałkowska , Katarzyna Świerczyńska

Abstract

The aim of the article is to verify whether bitcoin can act as a hedge, diversifier or safe haven on various stock markets, depending on the economic situation in the countries. To diversify the sample, we include five very different countries in our study: Japan, Venezuela, China, Estonia, and Sweden. Using daily data over the period 2014–2017, we estimate the dynamic conditional correlation model between main stock indices and bitcoin price in local currencies (Bitflyer — in the case of the yen, Kraken — in the case of the euro, Huobi in the case of yuan and LocalBitcoins in all the remaining cases), as well as between main stock indices and the bitcoin price in the US dollar (Bitfinex exchange). We apply the Stochastic Volatility Model with the Dynamic Conditional Correlation. We add binary variables into the dynamic correlation equation, indicating the occurrence of extreme return on the stock-exchange index in the lower 1%, 5% and 10% quantile. The conclusions vary, depending whether we consider trade on the local bitcoin exchanges or in the global one. We conclude that bitcoin was treated as a safe haven asset only in the case of Venezuela and investments in bolivars. In the case of local investments in Japan and China bitcoin behaved as a diversifier. In the bitcoin-friendly economies of Sweden and Estonia it acted as a weak hedge. In the case of the USD trade, the results suggest that bitcoin is a weak hedge with respect to all of the analyzed markets.
Author Agata Kliber (WIiGE / KMS)
Agata Kliber,,
- Department of Applied Mathematics
, Paweł Marszałek (WE / KB)
Paweł Marszałek,,
- Department of Banking
, Ida Musiałkowska (WGM / KE)
Ida Musiałkowska,,
- Department of European Studies
, Katarzyna Świerczyńska (WE / KPEiPR)
Katarzyna Świerczyńska,,
- Department of Economic Journalism and Public Relations
Journal seriesPhysica A-Statistical Mechanics and Its Applications, [Physica A: Statistical Mechanics and its Applications], ISSN 0378-4371, e-ISSN 1873-2119, (N/A 70 pkt)
Issue year2019
Vol524
Pages246-257
Publication size in sheets0.55
Keywords in Polishbitcoin, kryptowaluty, bezpieczna przystań, model zmienności stochastycznej
Keywords in EnglishMultivariate stochastic volatility, Bitcoin, Cryptocurrency, Safe haven
ASJC Classification2613 Statistics and Probability; 3104 Condensed Matter Physics
DOIDOI:10.1016/j.physa.2019.04.145
URL https://www.sciencedirect.com/science/article/pii/S0378437119305175
Languageen angielski
Score (nominal)70
Score sourcejournalList
ScoreMinisterial score = 70.0, 14-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0; Scopus SNIP (Source Normalised Impact per Paper): 2016 = 1.324; WoS Impact Factor: 2018 = 2.5 (2) - 2018=2.464 (5)
Citation count*23 (2020-09-27)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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