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Gold, Bitcoin, and Portfolio Diversification: Lessons from the Ukrainian War

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  • Kim Oosterlinck
  • Ariane Reyns
  • Ariane Szafarz

Abstract

How do major disruptive events, such as wars, affect the correlations between gold, Bitcoin, and financial assets? We address this question by estimating a dynamic conditional correlation (DCC) model before and during the 2022 Russian invasion of Ukraine. The results show that, after the outbreak of the war, the correlation between gold and stock markets dropped, confirming the diversification potential of gold during crises. The correlation between Bitcoin and oil declined as well. Meanwhile, the gold/Bitcoin correlation slightly decreased. Overall, our preliminary evidence suggests that gold and Bitcoin act as complements—rather than substitutes—for diversification purposes during international crises.

Suggested Citation

  • Kim Oosterlinck & Ariane Reyns & Ariane Szafarz, 2022. "Gold, Bitcoin, and Portfolio Diversification: Lessons from the Ukrainian War," Working Papers CEB 22-008, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/345041
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    References listed on IDEAS

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    Cited by:

    1. Charalampos Basdekis & Apostolos Christopoulos & Ioannis Katsampoxakis & Vasileios Nastas, 2022. "The Impact of the Ukrainian War on Stock and Energy Markets: A Wavelet Coherence Analysis," Energies, MDPI, vol. 15(21), pages 1-15, November.

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    More about this item

    Keywords

    Bitcoin; Gold; Portfolio diversification; 2022 Russian invasion;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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