Portfolio diversification is a risk mitigation strategy that entails distributing investments over a range of assets or asset classes in order to mitigate the overall risk and volatility associated with a portfolio.
Published in Chapter:
Unveiling Bitcoin's Safe Haven and Hedging Properties Beyond Diversification
Rui Manuel Teixeira Santos Teixeira Dias (Polytechnic Institute of Setubal, Portugal), Mariana Chambino (Polytechnic Institute of Setúbal, Portugal), Paulo Alexandre (Polytechnic Institute of Setúbal, Portugal), Cristina Morais da Palma (Instituto Politécnico de Setúbal, Portugal), and Liliana Almeida (Polytechnic Institute of Setúbal, Portugal)
Copyright: © 2023
|Pages: 31
DOI: 10.4018/978-1-6684-9039-6.ch018
Abstract
This study investigates whether Bitcoin may act as a safe haven in the capital markets, including France (CAC 40), Germany (DAX 30), the US (DJI), the UK (FTSE 100), Italy (FTSE MIB), Hong Kong (HANG SENG), Spain (IBEX 35), South Korea (KOSPI), Russia (IMOEX), and Japan (NIKKEI 225), as well as in commodities such as gold (GOLD HANDY HARMAN) and petroleum (WTI), and U.S. 10-year sovereign yields, during the 2020-2022 events. The authors analyze the financial integration and movements of markets to understand how BTC behaves during periods of global economic uncertainty. During the stress period, BTC did not integrate with the analyzed markets, suggesting that BTC exhibits properties of a hedge and a safe haven. BTC has properties of a hedge and a safe haven, and investors in these markets can benefit from investing in it as a secure asset and hedge. It is affected by CAC 40, FTSE 100, HANG SENG, and NIKKEI 225 stock indexes, and investors must carefully evaluate their investment strategies and risk tolerance when including BTC in their portfolio.