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Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold

Abstract : This study assesses the roles of Bitcoin as a hedge, a safe haven and/or a diversifier against extreme oil price movements, in comparison to the corresponding roles of gold. We use a quantile-on-quantile regression approach to capture the dependence structure between the considered market returns under different Bitcoin market conditions, while considering nuances of oil price movements, compared to gold. Our findings show that both Bitcoin and gold would serve the roles of a hedge, a safe haven and a diversifier for oil price movements. However, this property seems to be sensitive to the Bitcoin's and gold's different (bear, normal or bull) market conditions and to whether the oil price is in a downside, normal or upside regime. By controlling for new and relevant U.S. and global uncertainty indicators, we confirm that both Bitcoin and gold, but not oil, are assets where investors may park their cash during times of political and economic turmoil. The conditional Value-at-Risk (CoVaR) approach to risk management is then conducted, providing robust evidence of the usefulness of each of the Bitcoin and gold in expanded oil portfolios, in terms of diversification opportunities and downside risk reductions.
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Submitted on : Monday, September 24, 2018 - 11:06:40 AM
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Refk Selmi, Walid Mensi, Shawkat Hammoudeh, Jamal Bouoiyour. Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold. Energy Economics, Elsevier, 2018, 74, pp.787-801. ⟨10.1016/j.eneco.2018.07.007⟩. ⟨hal-01879667⟩



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