Diversification, hedge, and safe-haven properties of gold and bitcoin with portfolio implications during the Russia–Ukraine war

Abstract

The aim of this study is to examine the diversification, hedge, and safe-haven properties of gold and bitcoin against the main commodities exported by Russia (crude oil, natural gas, wheat) and the G7, Russia, China, and Europe market indices during the Russia–Ukraine war. The results show gold is only a diversifier during the war. Bitcoin is a strong hedge against wheat but a weak hedge against natural gas. While gold has been a strong safe-haven against Italy, Russia, the MSCI Europe index and natural gas in the extreme market declines during the war, bitcoin has not exhibited strong safe-haven properties against any asset. As a result of portfolio practices, gold generally provides a better hedge than bitcoin. However, the hedging effectiveness of gold takes relatively low values, ranging from 0.8% to 19%. The conditional diversification benefit (CDB) analysis results show that gold provides a higher and more stable CDB against assets than bitcoin. The results are significant for portfolio strategies to be implemented by investors and portfolio managers.