IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v9y2021i3p33-d579737.html
   My bibliography  Save this article

Are Cryptocurrencies a Backstop for the Stock Market in a COVID-19-Led Financial Crisis? Evidence from the NARDL Approach

Author

Listed:
  • Ahmed Jeribi

    (Faculty of Economics and Management of Mahdia, Hiboun 5111, Tunisia)

  • Sangram Keshari Jena

    (Finance & Economics Area, International Management Institute, Bhubaneswar 751003, India)

  • Amine Lahiani

    (CNRS, LEO, FRE, University Orléans, 2014, F-45067 Orléans, France)

Abstract

The study investigates the safe haven properties and sustainability of the top five cryptocurrencies (Bitcoin, Ethereum, Dash, Monero, and Ripple) and gold for BRICS stock markets during the COVID-19 crisis period from 31 January 2020 to 17 September 2020 in comparison to the precrisis period from 1 January 2016 to 30 January 2020, in a nonlinear and asymmetric framework using Nonlinear Autoregressive Distributed Lag (NARDL) methodology. Our results show that the relationship dynamics of stock market and cryptocurrency returns both in the short and long run are changing during the COVID-19 crisis period, which justifies our study using the nonlinear and asymmetric model. As far as a sustainable safe haven is concerned, Dash and Ripple are found to be a safe haven for all the five markets before the pandemic. However, all five cryptocurrencies are found to be a safe haven for three emerging markets, such as Brazil, China, and Russia, during the financial crisis. In a comparative framework, gold is found to be a suitable safe haven only for Brazil and Russia. The results have implications for index fund managers of BRICS markets to include Dash and Ripple in their portfolio as safe haven assets to protect its value during a stock market crisis.

Suggested Citation

  • Ahmed Jeribi & Sangram Keshari Jena & Amine Lahiani, 2021. "Are Cryptocurrencies a Backstop for the Stock Market in a COVID-19-Led Financial Crisis? Evidence from the NARDL Approach," IJFS, MDPI, vol. 9(3), pages 1-36, June.
    • Handle: RePEc:gam:jijfss:v:9:y:2021:i:3:p:33-:d:579737
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/9/3/33/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/9/3/33/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    2. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-397, August.
    3. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    4. Bouri, Elie & Gupta, Rangan & Lahiani, Amine & Shahbaz, Muhammad, 2018. "Testing for asymmetric nonlinear short- and long-run relationships between bitcoin, aggregate commodity and gold prices," Resources Policy, Elsevier, vol. 57(C), pages 224-235.
    5. Klein, Tony & Pham Thu, Hien & Walther, Thomas, 2018. "Bitcoin is not the New Gold – A comparison of volatility, correlation, and portfolio performance," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 105-116.
    6. Conlon, Thomas & McGee, Richard, 2020. "Safe haven or risky hazard? Bitcoin during the Covid-19 bear market," Finance Research Letters, Elsevier, vol. 35(C).
    7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    8. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    9. Jareño, Francisco & González, María de la O & Tolentino, Marta & Sierra, Karen, 2020. "Bitcoin and gold price returns: A quantile regression and NARDL analysis," Resources Policy, Elsevier, vol. 67(C).
    10. González, Maria de la O. & Jareño, Francisco & Skinner, Frank S., 2021. "Asymmetric interdependencies between large capital cryptocurrency and Gold returns during the COVID-19 pandemic crisis," International Review of Financial Analysis, Elsevier, vol. 76(C).
    11. Ahmed Jeribi & Mohamed Fakhfekh, 2021. "Portfolio management and dependence structure between cryptocurrencies and traditional assets: evidence from FIEGARCH-EVT-Copula," Journal of Asset Management, Palgrave Macmillan, vol. 22(3), pages 224-239, May.
    12. Kajtazi, Anton & Moro, Andrea, 2019. "The role of bitcoin in well diversified portfolios: A comparative global study," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 143-157.
    13. Klein, Tony, 2017. "Dynamic correlation of precious metals and flight-to-quality in developed markets," Finance Research Letters, Elsevier, vol. 23(C), pages 283-290.
    14. Corbet, Shaen & Meegan, Andrew & Larkin, Charles & Lucey, Brian & Yarovaya, Larisa, 2018. "Exploring the dynamic relationships between cryptocurrencies and other financial assets," Economics Letters, Elsevier, vol. 165(C), pages 28-34.
    15. Pal, Debdatta & Mitra, Subrata K., 2019. "Hedging bitcoin with other financial assets," Finance Research Letters, Elsevier, vol. 30(C), pages 30-36.
    16. Luther, William J. & Salter, Alexander W., 2017. "Bitcoin and the bailout," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 50-56.
    17. Achraf Ghorbel & Ahmed Jeribi, 2021. "Investigating the relationship between volatilities of cryptocurrencies and other financial assets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 817-843, December.
    18. Kliber, Agata & Marszałek, Paweł & Musiałkowska, Ida & Świerczyńska, Katarzyna, 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, Elsevier, vol. 524(C), pages 246-257.
    19. Urquhart, Andrew & Zhang, Hanxiong, 2019. "Is Bitcoin a hedge or safe haven for currencies? An intraday analysis," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 49-57.
    20. Garcia-Jorcano, Laura & Benito, Sonia, 2020. "Studying the properties of the Bitcoin as a diversifying and hedging asset through a copula analysis: Constant and time-varying," Research in International Business and Finance, Elsevier, vol. 54(C).
    21. Bouri, Elie & Shahzad, Syed Jawad Hussain & Roubaud, David & Kristoufek, Ladislav & Lucey, Brian, 2020. "Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 156-164.
    22. Gajardo, Gabriel & Kristjanpoller, Werner D. & Minutolo, Marcel, 2018. "Does Bitcoin exhibit the same asymmetric multifractal cross-correlations with crude oil, gold and DJIA as the Euro, Great British Pound and Yen?," Chaos, Solitons & Fractals, Elsevier, vol. 109(C), pages 195-205.
    23. Robin C. Sickles & William C. Horrace (ed.), 2014. "Festschrift in Honor of Peter Schmidt," Springer Books, Springer, edition 127, number 978-1-4899-8008-3, December.
    24. Wei, Wang Chun, 2018. "Liquidity and market efficiency in cryptocurrencies," Economics Letters, Elsevier, vol. 168(C), pages 21-24.
    25. Phillip, Andrew & Chan, Jennifer S.K. & Peiris, Shelton, 2018. "A new look at Cryptocurrencies," Economics Letters, Elsevier, vol. 163(C), pages 6-9.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ihsan Erdem Kayral & Ahmed Jeribi & Sahar Loukil, 2023. "Are Bitcoin and Gold a Safe Haven during COVID-19 and the 2022 Russia–Ukraine War?," JRFM, MDPI, vol. 16(4), pages 1-22, April.
    2. Bejaoui, Azza & Frikha, Wajdi & Jeribi, Ahmed & Bariviera, Aurelio F., 2023. "Connectedness between emerging stock markets, gold, cryptocurrencies, DeFi and NFT: Some new evidence from wavelet analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 619(C).
    3. Zarifhonarvar, Ali, 2022. "The Effect of Covid Pandemic on Cryptocurrency Markets; A Literature Review," EconStor Preprints 266369, ZBW - Leibniz Information Centre for Economics.
    4. Achraf Ghorbel & Wajdi Frikha & Yasmine Snene Manzli, 2022. "Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 387-425, September.
    5. Andreas Renard Widarto & Harjum Muharam & Sugeng Wahyudi & Irene Rini Demi Pangestuti, 2022. "ASEAN-5 and Crypto Hedge Fund: Dynamic Portfolio Approach," SAGE Open, , vol. 12(2), pages 21582440221, April.
    6. Ruzita Abdul-Rahim & Airil Khalid & Zulkefly Abdul Karim & Mamunur Rashid, 2022. "Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression," Mathematics, MDPI, vol. 10(12), pages 1-19, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chemkha, Rahma & BenSaïda, Ahmed & Ghorbel, Ahmed & Tayachi, Tahar, 2021. "Hedge and safe haven properties during COVID-19: Evidence from Bitcoin and gold," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 71-85.
    2. Bhuiyan, Rubaiyat Ahsan & Husain, Afzol & Zhang, Changyong, 2021. "A wavelet approach for causal relationship between bitcoin and conventional asset classes," Resources Policy, Elsevier, vol. 71(C).
    3. Hasan, Md. Bokhtiar & Hassan, M. Kabir & Rashid, Md. Mamunur & Alhenawi, Yasser, 2021. "Are safe haven assets really safe during the 2008 global financial crisis and COVID-19 pandemic?," Global Finance Journal, Elsevier, vol. 50(C).
    4. Wang, Pengfei & Zhang, Wei & Li, Xiao & Shen, Dehua, 2019. "Is cryptocurrency a hedge or a safe haven for international indices? A comprehensive and dynamic perspective," Finance Research Letters, Elsevier, vol. 31(C), pages 1-18.
    5. Chkili, Walid & Ben Rejeb, Aymen & Arfaoui, Mongi, 2021. "Does bitcoin provide hedge to Islamic stock markets for pre- and during COVID-19 outbreak? A comparative analysis with gold," Resources Policy, Elsevier, vol. 74(C).
    6. Ihsan Erdem Kayral & Ahmed Jeribi & Sahar Loukil, 2023. "Are Bitcoin and Gold a Safe Haven during COVID-19 and the 2022 Russia–Ukraine War?," JRFM, MDPI, vol. 16(4), pages 1-22, April.
    7. Parthajit Kayal & Purnima Rohilla, 2021. "Bitcoin in the economics and finance literature: a survey," SN Business & Economics, Springer, vol. 1(7), pages 1-21, July.
    8. Achraf Ghorbel & Ahmed Jeribi, 2021. "Investigating the relationship between volatilities of cryptocurrencies and other financial assets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 817-843, December.
    9. Achraf Ghorbel & Wajdi Frikha & Yasmine Snene Manzli, 2022. "Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 387-425, September.
    10. Walid Bakry & Audil Rashid & Somar Al-Mohamad & Nasser El-Kanj, 2021. "Bitcoin and Portfolio Diversification: A Portfolio Optimization Approach," JRFM, MDPI, vol. 14(7), pages 1-24, June.
    11. Rubaiyat Ahsan Bhuiyan & Afzol Husain & Changyong Zhang, 2023. "Diversification evidence of bitcoin and gold from wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.
    12. Hanif, Waqas & Areola Hernandez, Jose & Troster, Victor & Kang, Sang Hoon & Yoon, Seong-Min, 2022. "Nonlinear dependence and spillovers between cryptocurrency and global/regional equity markets," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    13. Shehzad, Khurram & Bilgili, Faik & Zaman, Umer & Kocak, Emrah & Kuskaya, Sevda, 2021. "Is gold favourable than bitcoin during the COVID-19 outbreak? Comparative analysis through wavelet approach," Resources Policy, Elsevier, vol. 73(C).
    14. Rizvi, Syed Kumail Abbas & Naqvi, Bushra & Mirza, Nawazish & Umar, Muhammad, 2022. "Safe haven properties of green, Islamic, and crypto assets and investor's proclivity towards treasury and gold," Energy Economics, Elsevier, vol. 115(C).
    15. Zhu, Xuehong & Niu, Zibo & Zhang, Hongwei & Huang, Jiaxin & Zuo, Xuguang, 2022. "Can gold and bitcoin hedge against the COVID-19 related news sentiment risk? New evidence from a NARDL approach," Resources Policy, Elsevier, vol. 79(C).
    16. Mokni, Khaled & Youssef, Manel & Ajmi, Ahdi Noomen, 2022. "COVID-19 pandemic and economic policy uncertainty: The first test on the hedging and safe haven properties of cryptocurrencies," Research in International Business and Finance, Elsevier, vol. 60(C).
    17. Duc Huynh, Toan Luu & Burggraf, Tobias & Wang, Mei, 2020. "Gold, platinum, and expected Bitcoin returns," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    18. Hsu, Shu-Han & Sheu, Chwen & Yoon, Jiho, 2021. "Risk spillovers between cryptocurrencies and traditional currencies and gold under different global economic conditions," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    19. Tiwari, Aviral Kumar & Raheem, Ibrahim Dolapo & Kang, Sang Hoon, 2019. "Time-varying dynamic conditional correlation between stock and cryptocurrency markets using the copula-ADCC-EGARCH model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    20. Będowska-Sójka, Barbara & Kliber, Agata, 2021. "Is there one safe-haven for various turbulences? The evidence from gold, Bitcoin and Ether," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:9:y:2021:i:3:p:33-:d:579737. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.