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No safe haven, only diversification and contagion — Intraday evidence around the COVID-19 pandemic

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  • Bei, Zeyun
  • Lin, Juan
  • Zhou, Yinggang

Abstract

Using the 2020 financial turmoil during the COVID-19 pandemic as a laboratory, we examine contagion, safe-haven, and diversification effects across stocks, gold, and oil. We develop a unified approach to quantify these effects using multivariate downside-to-upside and downside-to-downside CoVaR measures. Although gold lost its safe-haven glitter in the early pandemic, a diversification benefit still existed in the form of reduced downside risk and upside potential. However, strong contagion among the three assets occurred after the worldwide pandemic was declared on March 11, 2020. Further analysis shows that pandemic-related fear diminished diversification benefits of gold investment and exacerbated contagion spillovers.

Suggested Citation

  • Bei, Zeyun & Lin, Juan & Zhou, Yinggang, 2024. "No safe haven, only diversification and contagion — Intraday evidence around the COVID-19 pandemic," Journal of International Money and Finance, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:jimfin:v:143:y:2024:i:c:s0261560624000561
    DOI: 10.1016/j.jimonfin.2024.103069
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    More about this item

    Keywords

    Contagion; Safe haven; Diversification; CoVaR; COVID-19;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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