Can cryptocurrencies be a safe haven during the novel COVID-19 pandemic? Evidence from the Tunisian Stock Market

Authors

  • Ahmed Jeribi Faculty of Economics and Management of Mahdia, Université de Monastir, Tunisia https://orcid.org/0000-0003-3029-1585
  • Yasmin Snene Manzli Faculty of Economics and Management of Mahdia, Université de Monastir, Tunisia

DOI:

https://doi.org/10.30585/jrems.v3i1.555

Keywords:

Tunisian stock market, cryptocurrencies, Gold, VIX, WTI, COVID-19, OLS regression

Abstract

In this paper, we discuss the behavior of stock market returns in Tunisia during the COVID-19 outbreak. Using the OLS regression, we find that Bitcoin act as a hedge and Ethereum as a diversifier for Tunisia’s stock market before the COVID-19 outbreak; however, Bitcoin and Ethereum cannot generate benefits from portfolio diversification and hedging strategies for financial investors during the COVID-19. Moreover, Dash, Monero, and Ripple act as hedges before the COVID-19 outbreak and as diversifiers during this pandemic. Our results reveal that gold acts as a hedge and diversifier before the pandemic, but it's neither hedge nor a haven during the COVID-19 pandemic. Besides, the results indicated that the expected volatility of the US stock market has an impact on the Tunisian stock market. Finally, our results indicate that the growth rate of the COVID-19 confirmed cases and deaths harms Tunisia's stock market.

Downloads

Download data is not yet available.

References

Ahmar, A.S., & Del Val, E.B. (2020). SutteARIMA: Short-term forecasting method, a case: Covid-19 and the stock market in Spain. Science of the Total Environment, 729 (8), 138883. https://doi.org/10.1016/j.scitotenv.2020.138883

Al-Awadhi, A.M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of behavioral and experimental science, 27 (9), 100326. https://doi.org/10.1016/j.jbef.2020.100326

Aysan, A.F., Demir, E., Gozgor, G., & Lau, C.K.M. (2019). Effects of the geopolitical risks on Bitcoin returns and volatility. Research in International Business and Finance, 47 (1), 511–518. https://doi.org/10.1016/j.ribaf.2018.09.011

Bader, N.A. (2020). Stock markets’ reaction to COVID-19: Cases or fatalities? Research in International Business and Finance, 54(12), 101249. https://doi.org/10.1016/j.ribaf.2020.101249

Baig, A.S., Butt, H.A., Haroon, O., & Rizvi, S.A.R. (2020). Deaths, panic, lockdowns, and US equity markets: the case of COVID-19 pandemic. Finance Research Letters, xx (7), 101701. https://doi.org/10.1016/j.frl.2020.101701

Baur, D.G., & Lucey, B.M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. The Financial. Review, 45 (2), 217–229. https://dx.doi.org/10.2139/ssrn.952289

Baur, D. G., & McDermott, T. K. (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34 (8), 1886–1898. https://doi.org/10.1016/j.jbankfin.2009.12.008

Baur, D. G., & McDermott, T. K. (2016). Why is gold a safe haven? Journal of Behavioral

and Experimental Finance, 10 (6), 63–71. https://doi.org/10.1016/j.jbef.2016.03.002

Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative

assets? Journal of International Financial Markets, Institutions and Money, 54 (5), 177-189. https://doi.org/10.1016/j.intfin.2017.12.004

Beckmann, J., Berger, T., & Czudaj, R. (2015). Does gold act as a hedge or a safe haven for

stocks? A smooth transition approach. Economic Modelling, 48 (8), 16–24. https://doi.org/10.1016/j.econmod.2014.10.044

Bouri, E., Molnár, P., Azzi, G., Roubaud, D., & Hagfors, L.I. (2017). On the hedge and safe haven properties of Bitcoin: is it really more than a diversifier? Finance Research Letters, 20 (2), 192–198. https://doi.org/10.1016/j.frl.2016.09.025

Bouri, E., Shahzad, S., Roubaud, D., Kristoufek, L., & Lucey, B. (2020). Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis. The Quarterly Review of Economics and Finance, 77 (8), 156-164. https://doi.org/10.1016/j.qref.2020.03.004

Bouri, E., Lucey, B., & Roubaud, D. (2019). Cryptocurrencies and the downside risk in equity investments. Finance Research Letters, 33 (3), 101211. https://doi.org/10.1016/j.frl.2019.06.009

Cheema, M.A., Faff, R.W., & Szulczuk, K. (2020). The 2008 Global Financial Crisis and COVID-19 Pandemic: How Safe is the Safe Haven Assets? https://dx.doi.org/10.2139/ssrn.3590015

Conlon, T., & McGee, R. (2020). Safe haven or risky hazard? Bitcoin during the COVID-19 bear market. Finance Research Letters, 35 (7), 101607. https://doi.org/10.1016/j.frl.2020.101607

Corbet, S., Meegan, A., Larkin, C., Lucey, B., & Yarovaya, L. (2018). Exploring the dynamic relationships between cryptocurrencies and other financial assets. Economics Letters, 165 (4), 28–34. https://doi.org/10.1016/j.econlet.2018.01.004

Corbet, S., Larkin, C., & Lucey, B. (2020). The contagion effects of the COVID-19 pandemic: Evidence from gold and cryptocurrencies. Finance Research Letters, 35 (7), 101554. https://doi.org/10.1016/j.frl.2020.101554

Corbet, S., (Greg) Hou, Y., Hu, Y., Larkin, C., & Oxley, L. (2020a). Any port in a storm: Cryptocurrency safe-havens during the COVID-19 pandemic. Economics Letters, 194 (9), 109377. https://doi.org/10.1016/j.econlet.2020.109377

Feng, W., Wang, Y., & Zhang, Z. (2018). Can cryptocurrencies be a safe haven: a tail risk perspective analysis. Applied Economics, 50 (4), 4745–4762. https://doi.org/10.1080/00036846.2018.1466993

Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the world economy. https://dx.doi.org/10.2139/ssrn.3557504

Gates, B. (2020). Responding to Covid-19-A once-in-a-century pandemic? New England Journal of Medicine, 382 (4), 1677-1679. DOI: 10.1056/NEJMp2003762

Gil-Alana, L., Abakah, E., & Rojo, M. (2020). Cryptocurrencies and stock market indices. are they related? Research in International Business and Finance, 51(1), 101063. https://doi.org/10.1016/j.ribaf.2019.101063

Goodwell, J. W. (2020). COVID-19 and finance: Agendas for future research. Finance Research Letters, 35 (7), 101512. https://doi.org/10.1016/j.frl.2020.101512

Gorton, G., Lewellen, S., & Metrick, A. (2012). The safe-asset share. American Economic Review. 102 (3), 101–106. DOI: 10.1257/aer.102.3.101

Guesmi, K., Saadi, S., Abid, I., & Ftiti, Z. (2019). Portfolio diversification with virtual currency: evidence from bitcoin. International Review of Financial Analysis, 63 (5), 431-437. https://doi.org/10.1016/j.irfa.2018.03.004

Han, H., Linton, O., Oka, T., & Whang, Y. J. (2016). The cross-quantilogram: Measuring quantile dependence and testing directional predictability between time series. Journal of Econometrics, 193 (7), 251–270. https://doi.org/10.1016/j.jeconom.2016.03.001

Hood, M., & Malik, F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics. 22 (2), 47–52. https://doi.org/10.1016/j.rfe.2013.03.001

Ji, Q., Zhang, D., & Zhao, Y. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis. 71 (10), 101526. https://doi.org/10.1016/j.irfa.2020.101526

Klein, T., Thu, H. P., & Walther, T. (2018). Bitcoin is not the new gold-A comparison of volatility, correlation, and portfolio performance. International Review of Financial Analysis, 59 (10), 105–116. https://doi.org/10.1016/j.irfa.2018.07.010

Kliber, A., Marsza?ek, P., Musia?kowska, I., & ?wierczy?ska, K. (2019). Bitcoin: safe haven, hedge, or diversifier? Perception of bitcoin in the context of a country's economic situation – a stochastic volatility approach. Physica A: Statistical Mechanics and its Applications, 524 (6), 246–257. https://doi.org/10.1016/j.physa.2019.04.145

Liu, W. (2019). Portfolio diversification across cryptocurrencies. Finance Research Letters, 29 (6), 200-205. https://doi.org/10.1016/j.frl.2018.07.010

Lucey, B. M., & Li, S. (2015). What precious metals act as safe havens, and when? Some US evidence. Applied Economics Letters, 22(1), 35–45. https://doi.org/10.1080/13504851.2014.920471

Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system.

Reboredo, J.C. (2013). Is gold a safe-haven or a hedge for the US dollar? Implications for risk management. Journal of Banking & Finance, 37 (8), 2665–2676. https://doi.org/10.1016/j.jbankfin.2013.03.020

Shahzad, S.J.H., Bouri, E., Roubaud, D., Kristoufek, L., & Lucey, B. (2019). Is Bitcoin a better safe-haven investment than gold and commodities? International Review of Financial Analysis, 63 (5), 322–330. https://doi.org/10.1016/j.irfa.2019.01.002

Smales, L.A. (2019). Bitcoin as a safe haven: Is it even worth considering? Finance Research Letters, 30 (9), 385–393. https://doi.org/10.1016/j.frl.2018.11.002

Smith, R.D. (2006). Responding to global infectious disease outbreaks: Lessons from SARS on the role of risk perception, communication, and management. Social Science & Medicine, 63 (12), 3113-3123. https://doi.org/10.1016/j.socscimed.2006.08.004

Tiwari, A., Raheem, I., Kang, S. (2019). Time-varying dynamic conditional correlation between stock and cryptocurrency markets using the copula-ADCC-EGARCH model. Physica A: Statistical Mechanics and its Applications, 535 (12), 122295. https://doi.org/10.1016/j.physa.2019.122295

Urquhart, A., and Zhang, H. (2019). Is Bitcoin a hedge or safe haven for currencies? An intraday analysis. International Review of Financial Analysis, 63 (4), 49-57. https://doi.org/10.1016/j.irfa.2019.02.009

Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 36 (10), 101528. https://doi.org/10.1016/j.frl.2020.101528

Downloads

Published

2020-10-30

How to Cite

Jeribi, A., & Snene Manzli, Y. . (2020). Can cryptocurrencies be a safe haven during the novel COVID-19 pandemic? Evidence from the Tunisian Stock Market. Journal of Research in Emerging Markets, 3(1), 14-31. https://doi.org/10.30585/jrems.v3i1.555