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Infectious disease (COVID-19)-related uncertainty and the safe-haven features of bonds markets

Author

Listed:
  • Shoaib Ali
  • Imran Yousaf
  • Zaghum Umar

Abstract

Purpose - This study aims to examine the hedge, diversifier and safe-haven properties of bonds against infectious disease-related equity market volatility (IDEMV), like COVID-19. Design/methodology/approach - The authors apply wavelet coherence methodology on the daily data of IDEMV and bond market (US, UK, Japan, Switzerland, Canada, Australia, Sweden, China and Europe) indices from 1 January 2000 to 14 February 2021. Findings - The results show no significant co-movement between these bond indices and IDEMV, thus confirming that they serve as a hedge against IDEMV. However, during the turbulent period like COVID-19, the authors find that the US, UK, Japan, Switzerland, Canada, Australia, Sweden, China and European bond markets act as safe-haven against IDEMV, whereas the UK, US, Japan and Canadian bond markets demonstrate an in-phase and positive co-movement with IDEMV during COVID-19, suggesting their role as a diversifier. Research limitations/implications - The study findings are important for investors and portfolio managers regarding risk management, portfolio diversification and investment strategies. Originality/value - The authors contribute to the fast growing body of work on the financial impacts of COVID-19 as well as to ongoing consideration of whether a bond is a safe-haven investment.

Suggested Citation

  • Shoaib Ali & Imran Yousaf & Zaghum Umar, 2022. "Infectious disease (COVID-19)-related uncertainty and the safe-haven features of bonds markets," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(4), pages 477-487, February.
    • Handle: RePEc:eme:rbfpps:rbf-04-2021-0069
    DOI: 10.1108/RBF-04-2021-0069
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    Citations

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    Cited by:

    1. Yousaf, Imran & Ali, Shoaib & Marei, Mohamed & Gubareva, Mariya, 2024. "Spillovers and hedging effectiveness between islamic cryptocurrency and metal markets: Evidence from the COVID-19 outbreak," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1126-1151.
    2. Ali, Shoaib & Naveed, Muhammad & Gubareva, Mariya & Vinh Vo, Xuan, 2024. "Reputational contagion from the Silicon Valley Bank debacle," Research in International Business and Finance, Elsevier, vol. 69(C).
    3. Ali, Shoaib & Ijaz, Muhammad Shahzad & Yousaf, Imran & Li, Yanshuang, 2023. "Connectedness and portfolio management between renewable energy tokens and metals: Evidence from TVP-VAR approach," Energy Economics, Elsevier, vol. 127(PA).
    4. Ali, Shoaib & Naveed, Muhammad & Hanif, Hasan & Gubareva, Mariya, 2024. "The resilience of Shariah-compliant investments: Probing the static and dynamic connectedness between gold-backed cryptocurrencies and GCC equity markets," International Review of Financial Analysis, Elsevier, vol. 91(C).
    5. Ali, Shoaib & Naveed, Muhammad & Youssef, Manel & Yousaf, Imran, 2024. "FinTech-powered integration: Navigating the static and dynamic connectedness between GCC equity markets and renewable energy cryptocurrencies," Resources Policy, Elsevier, vol. 89(C).
    6. Hou, Wenxuan & Li, Mao & Main, Brian G.M. & Liu, Xiaofan, 2023. "Pandemics and financial development: A lesson from the 1918 influenza pandemic," Journal of Corporate Finance, Elsevier, vol. 83(C).
    7. Ali, Shoaib & Umar, Muhammad & Gubareva, Mariya & Vo, Xuan Vinh, 2024. "Extreme connectedness between NFTs and US equity market: A sectoral analysis," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 299-315.

    More about this item

    Keywords

    COVID-19; Financial market uncertainty; Treasury securities; Corporate bonds; Safe havens; C22; C32; E43; D80; G12;
    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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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