Abstract
The COVID-19 pandemic provides the first widespread bear market conditions since the inception of cryptocurrencies. We test the haven properties of cryptocurrencies for African stocks and commodity markets in a pandemic implementing the frequency domain spillover index. Data spans 11th August 2015 to 28th August 2020 at a daily frequency. Findings show weak interconnectedness across markets suggesting non-contagion risk and that cryptocurrency are safe havens for African stocks and commodity indices from the medium-term. We find the major transmitters of spillover effects across markets to be time-varying and heterogeneous. This study provides significant risk diversification benefits for policymakers and investors in the African financial markets.
Highlights
The finance literature provides evidence that the loss aversion of investors makes them extremely concerned with loss avoidance than related gains from investment and this motivates the concept of an investment haven (Tversky and Kahneman, 1991; Hwang and Satchell, 2010)
The net pairwise directional spillover effect from one market to another is measured by subtracting the second variable from the first and
From Panel 2, we observe that all cryptocurrencies are net recipients of spillover effects from the Casablanca stock market across frequencies except for Ethereum (CSE-ETH) which is a net transmitter of spillover effects to CSE at freq
Summary
The finance literature provides evidence that the loss aversion of investors makes them extremely concerned with loss avoidance than related gains from investment and this motivates the concept of an investment haven (Tversky and Kahneman, 1991; Hwang and Satchell, 2010). The empirical literature has established several haven assets including currencies (Sakemoto, 2018), gold (Baur and McDermott, 2010), and bonds (Flavin et al, 2014). The exponential growth of cryptocurrencies has stirred several studies on their hedge, diversification, and have benefits for traditional assets. Notable studies in this regard include Bouri, Shahzad, and Roubaud (2019) who study the haven and hedging characteristics of eight virtual currencies against ten developed equity sectors. Ünvana (2019) explores the effects of Bitcoin on Nikkei 225, BIST 100 index, S&P 500, and SSE 380 stock markets using value-at-risk and causality analysis.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
