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A Safe Haven Index

Author

Listed:
  • Baur, Dirk G.
  • Dimpfl, Thomas
  • Pena, Javier

Abstract

The literature has identified and studied several safe haven assets individually but has not yet considered the collective dynamics of these assets. In this paper, we introduce a novel Safe Haven Index (SHI) to track the dynamics of safe haven assets. The index is based on the time-varying first principal component of all constituent assets and can be updated without changing past values. The empirical analysis illustrates that safe haven assets protect against extreme stock market losses and co-move with the stock market over longer horizons.

Suggested Citation

  • Baur, Dirk G. & Dimpfl, Thomas & Pena, Javier, 2025. "A Safe Haven Index," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325011808
    DOI: 10.1016/j.frl.2025.107922
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    References listed on IDEAS

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    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. Dai, Peng-Fei & Xiong, Xiong & Zhou, Wei-Xing, 2021. "A global economic policy uncertainty index from principal component analysis," Finance Research Letters, Elsevier, vol. 40(C).
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    15. Ryan, Michael & Corbet, Shaen & Oxley, Les, 2024. "Is gold always a safe haven?," Finance Research Letters, Elsevier, vol. 64(C).
    16. Okoroafor, Ugochi C. & Leirvik, Thomas, 2023. "Time-varying market efficiency of safe-haven assets," Finance Research Letters, Elsevier, vol. 56(C).
    17. Bredin, Don & Conlon, Thomas & Potì, Valerio, 2015. "Does gold glitter in the long-run? Gold as a hedge and safe haven across time and investment horizon," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 320-328.
    18. Kateryna Anatoliyevna Kopyl & John Byong-Tek Lee, 2016. "How safe are the safe haven assets?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(4), pages 453-482, November.
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    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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