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Using precious metals to hedge cryptocurrency policy and price uncertainty

Author

Listed:
  • Hassan, M. Kabir
  • Hasan, Md. Bokhtiar
  • Rashid, Md. Mamunur

Abstract

This study discovers a new dimension by analyzing the time-varying correlations between the top four precious metals and cryptocurrency uncertainty indices (UCRY Policy and Price). Using the Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model, our findings show that gold, among the precious metals, exhibits a consistent positive correlation with both UCRY Policy and Price, suggesting that gold has a stable and reliable safe-haven property against cryptocurrency uncertainty. Thus, our research offers investors to diversify their portfolios by investing in gold when uncertainty stems from cryptocurrency markets.

Suggested Citation

  • Hassan, M. Kabir & Hasan, Md. Bokhtiar & Rashid, Md. Mamunur, 2021. "Using precious metals to hedge cryptocurrency policy and price uncertainty," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002548
    DOI: 10.1016/j.econlet.2021.109977
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    References listed on IDEAS

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    7. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cryptocurrency uncertainty; Hedge; Safe-haven; Precious metals;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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