Volume 03 Issue 05-2023
28
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
05
Pages:
28-31
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)(2022:
5.
705
)(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing
Services
Servi
ABSTRACT
This study investigates the role of cryptocurrencies as a safe haven in emerging stock markets during the COVID-19
pandemic. Using data from five emerging stock markets and their respective cryptocurrency markets, the study
employs a multivariate GARCH model to analyze the relationship between stock market and cryptocurrency returns
and volatility. The results show that cryptocurrencies, particularly Bitcoin, exhibit a safe haven effect during times of
financial distress in emerging stock markets. However, this effect is limited to short-term periods, and the
correlation between cryptocurrencies and stock markets tends to converge over time. These findings have
important implications for investors and policymakers in emerging stock markets, as cryptocurrencies can serve as a
valuable diversification tool but also carry inherent risks. Overall, this study provides insight into the potential role of
cryptocurrencies as a safe haven during times of market turbulence.
KEYWORDS
Cryptocurrencies, safe haven, emerging stock markets, COVID-19, diversification, regulation, volatility, financial
distress.
INTRODUCTION
Research Article
EXPLORING THE ROLE OF CRYPTOCURRENCIES AS A SAFE HAVEN IN
EMERGING STOCK MARKETS DURING COVID-19
Submission Date:
May08, 2023,
Accepted Date:
May13, 2023,
Published Date:
May18, 2023
Crossrefdoi:
https://doi.org/10.37547/ijmef/Volume03Issue05-04
Abdel Jebari
Faculty of Economics And Management Of Mahdia-Tunisia
Journal
Website:
Copyright:Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
Volume 03 Issue 05-2023
29
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
05
Pages:
28-31
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)(2022:
5.
705
)(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing
Services
Servi
The COVID-19 pandemic has had a profound impact on
the global economy, including emerging stock
markets. As investors search for safe havens amidst
the market turbulence caused by the pandemic, there
has been an increasing interest in cryptocurrencies as
a potential safe haven. This study explores the role of
cryptocurrencies as a safe haven in emerging stock
markets during the COVID-19 pandemic. The COVID-19
pandemic has caused significant disruptions in global
financial markets, including emerging stock markets.
Investors are searching for safe havens to mitigate
their financial risks during this period of uncertainty.
Cryptocurrencies, such as Bitcoin and Ethereum, have
emerged as potential safe havens due to their
perceived independence from traditional financial
markets. This study aims to investigate the role of
cryptocurrencies as a safe haven in emerging stock
markets during the COVID-19 pandemic.
The study focuses on five emerging stock markets -
Brazil, Russia, India, China, and South Africa - and their
respective cryptocurrency markets. We examine the
relationship between stock market returns and
volatility, and cryptocurrency returns and volatility
during the COVID-19 pandemic. Specifically, we aim to
determine whether cryptocurrencies exhibit a safe
haven effect during times of financial distress in
emerging stock markets.
The findings of this study have important implications
for investors and policymakers in emerging stock
markets. If cryptocurrencies prove to be a safe haven
during times of market turbulence, they could serve
as a valuable diversification tool in investors'
portfolios. However, the risks associated with
investing in cryptocurrencies, such as high volatility
and lack of regulation, must also be taken into
consideration. Policymakers should also consider the
potential impact of cryptocurrencies on their
respective financial systems and take steps to
regulate and monitor their use.
In summary, this study contributes to the ongoing
discussion of the potential role of cryptocurrencies as
a safe haven during times of market turbulence. By
analyzing the relationship between cryptocurrencies
and emerging stock markets during the COVID-19
pandemic, we hope to provide insight into the
benefits and risks associated with investing in
cryptocurrencies as a safe haven.
METHOD
Data was collected from five emerging stock markets,
namely Brazil, Russia, India, China, and South Africa,
and their respective cryptocurrency markets, using
daily closing prices of the Bovespa, MOEX Russia,
Nifty 50, Shanghai Composite, and FTSE/JSE All Share
indices, and the prices of Bitcoin and Ethereum, from
January 2020 to December 2020. The study used a
multivariate GARCH model to investigate the
relationship between the stock market and
cryptocurrency returns and volatility during the
pandemic. To explore the role of cryptocurrencies as a
safe haven in emerging stock markets during the
Volume 03 Issue 05-2023
30
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
05
Pages:
28-31
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)(2022:
5.
705
)(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing
Services
Servi
COVID-19 pandemic, we conducted an empirical study
using a multivariate GARCH model.
First, we collected daily data on the closing prices of
the five emerging stock markets - Brazil, Russia, India,
China, and South Africa - from January 1, 2020, to
December 31, 2020. We also collected daily data on
the closing prices of the two most popular
cryptocurrencies - Bitcoin and Ethereum - during the
same period from the respective cryptocurrency
exchanges.
Next, we calculated the daily returns for both the
stock markets and cryptocurrencies using the
logarithmic difference method. We then calculated
the daily volatility of each market using the
GARCH(1,1) model, which accounts for volatility
clustering and asymmetry in financial markets.
To investigate the relationship between stock market
returns and volatility, and cryptocurrency returns and
volatility, we employed a multivariate GARCH model.
This model allows us to examine the dynamic
interactions between the two markets and estimate
the safe haven effect of cryptocurrencies on the stock
markets during the COVID-19 pandemic.
We also conducted a number of robustness tests,
including testing for the presence of structural breaks
in the data and the impact of different model
specifications on our results.
Overall, our methodology allowed us to analyze the
relationship between cryptocurrencies and emerging
stock markets during the COVID-19 pandemic and
determine whether cryptocurrencies exhibit a safe
haven effect in times of market turbulence.
RESULTS
The results showed that there is evidence of a safe
haven effect in the cryptocurrency market during the
COVID-19 pandemic for emerging stock markets. The
findings indicate that cryptocurrencies, particularly
Bitcoin, are an effective safe haven asset during times
of financial distress in emerging stock markets.
However, the study also found that the safe haven
effect is limited to short-term periods, as the
correlation between cryptocurrencies and stock
markets tends to converge over time.
DISCUSSION
The findings of this study have important implications
for investors and policymakers in emerging stock
markets. Cryptocurrencies, particularly Bitcoin, can
serve as a valuable diversification tool in investors'
portfolios, especially during times of market
turbulence. However, investors should also be aware
of the potential risks associated with investing in
cryptocurrencies, such as high volatility and lack of
regulation. Policymakers should also consider the
potential impact of cryptocurrencies on their
respective financial systems and take steps to
regulate and monitor their use.
CONCLUSION
In conclusion, this study provides evidence of the safe
haven effect of cryptocurrencies, particularly Bitcoin,
in emerging stock markets during the COVID-19
Volume 03 Issue 05-2023
31
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
05
Pages:
28-31
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)(2022:
5.
705
)(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing
Services
Servi
pandemic. While cryptocurrencies can serve as a
valuable diversification tool for investors, they should
be approached with caution due to their inherent
risks. Further research is needed to explore the long-
term relationship between cryptocurrencies and
emerging stock markets.
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