Safe haven assets for international stock markets: A regime-switching factor copula approach

This paper assesses the safe haven properties of a large number of assets during global-level crises in international stock markets. The dataset consists of returns on 36 possible safe haven assets from different asset classes (government bonds, currencies, and commodities) and returns on 46 developed and emerging stock markets over the period from 1999 to 2020. A novel approach based on a regime-switching factor copula model is proposed to examine safe haven properties with such a relatively high-dimensional dataset. We find that, on average over the full sample period, the Japanese yen is the safest asset and the US government bond is the second safest, followed by a particular set of currencies. Government bonds generally have a lower but moderate degree of safe haven property. The ranking among these assets, however, varies depending on major crisis episodes. There is no clear evidence of safe haven roles in the remaining assets.