Is bitcoin a safe haven or a hedging asset? Evidence from China |
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| Institution: | Business School, Hunan University, Changsha, 410082, China;Center for Finance and Investment Management, Hunan University, Changsha, 410082, China;Center for Polymer Studies and Department of Physics, Boston University, Boston, MA, 02215, USA;Business School, Hunan University, Changsha, 410082, China;Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, 510275, China;Business School, Hunan University, Changsha, 410082, China;Center for Finance and Investment Management, Hunan University, Changsha, 410082, China;Business School, Hunan University, Changsha, 410082, China |
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| Abstract: | Based on daily data about Bitcoin and six other major financial assets (stocks, commodity futures (commodities), gold, foreign exchange (FX), monetary assets, and bonds) in China from 2013 to 2017, we use a VAR-GARCH-BEKK model to investigate mean and volatility spillover effects between Bitcoin and other major assets and explore whether Bitcoin can be used either as a hedging asset or a safe haven. Our empirical results show that (i) only the monetary market, i.e., the Shanghai Interbank Offered Rate (SHIIBOR) has a mean spillover effect on Bitcoin and (ii) gold, monetary, and bond markets have volatility spillover effects on Bitcoin, while Bitcoin has a volatility spillover effect only on the gold market. We further find that Bitcoin can be hedged against stocks, bonds and SHIBOR and is a safe haven when extreme price changes occur in the monetary market. Our findings provide useful information for investors and portfolio risk managers who have invested or hedged with Bitcoin. |
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| Keywords: | Bitcoin Spillover effects Hedging asset Safe haven C10 G11 |
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