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Safe-haven properties and portfolio applications of cryptocurrencies: Evidence from the emerging markets

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  • Ustaoglu, Erkan

Abstract

This paper investigates the hedging and safe-haven properties of Bitcoin (BTC) and Ethereum (ETH) for emerging stock market (ESM) indices. The results show all hedging costs are increasing during the pandemic. When the study's hedging effectiveness is generally evaluated, BTC provides better protection against ESM indices than ETH. Moreover, during the pre–pandemic period, investors should create portfolios using an optimal weights-based strategy rather than a hedged portfolio-based strategy. Finally, while BTC and ETH have weak safe-haven properties against most ESM indices, only BTC have strong safe-haven properties against the Malaysia stock index during the pandemic period.

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  • Ustaoglu, Erkan, 2022. "Safe-haven properties and portfolio applications of cryptocurrencies: Evidence from the emerging markets," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000423
    DOI: 10.1016/j.frl.2022.102716
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    2. Hsu, Shu-Han & Cheng, Po-Keng & Yang, Yiwen, 2024. "Diversification, hedging, and safe-haven characteristics of cryptocurrencies: A structural change approach," International Review of Financial Analysis, Elsevier, vol. 93(C).
    3. Al-Nassar, Nassar S. & Boubaker, Sabri & Chaibi, Anis & Makram, Beljid, 2023. "In search of hedges and safe havens during the COVID─19 pandemic: Gold versus Bitcoin, oil, and oil uncertainty," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 318-332.
    4. Fernandes, Leonardo H.S. & Bouri, Elie & Silva, José W.L. & Bejan, Lucian & de Araujo, Fernando H.A., 2022. "The resilience of cryptocurrency market efficiency to COVID-19 shock," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 607(C).
    5. Azza Bejaoui & Wajdi Frikha & Ahmed Jeribi, 2023. "On the dynamic connectedness between the G7 stock market indices and different asset classes: Fresh insights from the COVID-19 pandemic and Russia–Ukraine war," SN Business & Economics, Springer, vol. 3(11), pages 1-21, November.
    6. Just, Małgorzata & Echaust, Krzysztof, 2024. "Cryptocurrencies against stock market risk: New insights into hedging effectiveness," Research in International Business and Finance, Elsevier, vol. 67(PA).
    7. N.S. Al-Nassar & Sabri Boubaker & A. Chaibi & B. Makram, 2023. "In Search of Hedges and Safe Havens during the COVID-19 Pandemic: Gold versus Bitcoin, Oil, and Oil Uncertainty," Post-Print hal-04435437, HAL.
    8. Ustaoglu, Erkan, 2023. "Diversification, hedge, and safe-haven properties of gold and bitcoin with portfolio implications during the Russia–Ukraine war," Resources Policy, Elsevier, vol. 84(C).
    9. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.
    10. Anoop S. Kumar & Balaga Mohana Rao, 2023. "Are non‐fungible token coins a good hedge against the stock market volatility?," Australian Economic Papers, Wiley Blackwell, vol. 62(4), pages 764-772, December.
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    12. Shaen Corbet & Les Oxley, 2023. "Investigating the Academic Response to Cryptocurrencies: Insights from Research Diversification as Separated by Journal Ranking," Review of Corporate Finance, now publishers, vol. 3(4), pages 487-528, September.

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