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The Importance of Bitcoin and Commodities as Investment Diversifiers in OPEC and Non-OPEC Countries

Author

Listed:
  • Angham Ben Brayek

    (Department of Economic and Finance, Taif University, Taif 21974, Saudi Arabia)

  • Hanen Ben Ameur

    (Department of Economic and Finance, Taif University, Taif 21974, Saudi Arabia)

  • Farea Mohammed Alharbi

    (Department of Economic and Finance, Taif University, Taif 21974, Saudi Arabia)

Abstract

The study aims to critically assess the safe-haven properties of Bitcoin and a diverse set of commodities in mitigating stock market risks during periods of extreme financial turbulence. Specifically, this research seeks to evaluate the effectiveness of these assets as hedging tools or diversifiers in the portfolios of both OPEC and non-OPEC countries, focusing on their behavior during the COVID-19 pandemic. We employ a wavelet coherence approach to analyze the dynamic relationships between the variables. Portfolio optimization is conducted using CVaR to assess the effectiveness of these assets as safe havens, hedges, or diversification tools in mitigating financial risks during periods of heightened market volatility. The diversification benefits of commodities and Bitcoin in OPEC and non-OPEC stock portfolios decrease over time as their co-movement with stock markets increases. During the COVID-19 period, BTC did not act as a safe haven. However, gold served as a hedge for non-OPEC countries. Using CVaR, we found that BTC provides stronger diversification benefits than commodities, followed by gold. We examine the safe-haven role of Bitcoin and various commodities, specifically within the context of both OPEC and non-OPEC countries. Our study offers a more comprehensive analysis of how BTC and commodities function as portfolio assets during financial stress, providing valuable insights for investors and policymakers.

Suggested Citation

  • Angham Ben Brayek & Hanen Ben Ameur & Farea Mohammed Alharbi, 2024. "The Importance of Bitcoin and Commodities as Investment Diversifiers in OPEC and Non-OPEC Countries," Economies, MDPI, vol. 12(12), pages 1-11, December.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:12:p:351-:d:1547835
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    References listed on IDEAS

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    2. Arianna Agosto & Alessia Cafferata, 2020. "Financial Bubbles: A Study of Co-Explosivity in the Cryptocurrency Market," Risks, MDPI, vol. 8(2), pages 1-14, April.
    3. Conlon, Thomas & McGee, Richard, 2020. "Safe haven or risky hazard? Bitcoin during the Covid-19 bear market," Finance Research Letters, Elsevier, vol. 35(C).
    4. Dutta, Anupam & Das, Debojyoti & Jana, R.K. & Vo, Xuan Vinh, 2020. "COVID-19 and oil market crash: Revisiting the safe haven property of gold and Bitcoin," Resources Policy, Elsevier, vol. 69(C).
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    Keywords

    Bitcoin; safe haven; OPEC; wavelet; CVaR;
    All these keywords.

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