Safe haven for Asian equity markets during financial distress: Bitcoin versus Gold

Abstract

This study aims to analyse the role of bitcoin and gold as safe haven assets for Asian equity markets during periods of high market uncertainty related to the global COVID-19 pandemic, high volatility and extreme stock market conditions. Our empirical analysis employs the DCC-GARCH methodology to estimate the time-varying relationship between bitcoin/gold and the Asian stock market from 2016 to 2023. Our findings reveal that bitcoin serves as a strong hedge for Taiwan and Pakistan, whereas gold can be considered a strong hedge for Japan, Singapore, India, Thailand and Vietnam. Interestingly, we observe that bitcoin does not exhibit safe haven properties in any of the Asian countries observed. In contrast, gold demonstrates strong safe haven abilities for Singapore, India and Thailand. These results remain consistent across various measures of market turmoil, including the volatility index, COVID-19-related periods and low quantiles on the stock market. Furthermore, our results suggest that the perception and adoption of gold as a safe haven asset in Japan and Vietnam is mainly influenced by global events and uncertainties, rather than localized stock market conditions. These findings offer valuable information for investors, financial institutions as well as policy makers and regulators as to how cryptocurrency and gold have evolved as hedge and safe haven assets in Asia during uncertainty periods.