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1.
International Journal of Finance & Economics ; 27(4):4607-4618, 2022.
Article in English | ProQuest Central | ID: covidwho-2075011

ABSTRACT

This article examines the hedging effectiveness of U.S. stocks against uncertainties due to equity market (financial risk) and pandemics (health risk), including Covid‐19 pandemic. Consequently, we consider two categories of U.S. stocks—defensive and non‐defensive stocks drawn from 10 different sectors and distinctly analysed over two data samples—pre‐ and post‐Covid periods. We construct a predictive panel data model that simultaneously accounts for both heterogeneity and common correlated effects and also complementarily determine the predictive power of accounting for uncertainties in the valuation of U.S. stocks. We find that hedging effectiveness is driven by the types of stocks and measures of uncertainty. Defensive stocks provide a good hedge for pandemic‐induced uncertainty, and the hedging effectiveness is higher during calm market conditions as compared to turbulent conditions, while both categories lack hedging capability in the face of equity‐induced uncertainty. Finally, we find that the inclusion of uncertainty in the predictive model of U.S. stock returns improves its forecasts and this conclusion is robust to alternative measures of uncertainty and multiple forecast horizons.

2.
The Quarterly Review of Economics and Finance ; 2021.
Article in English | ScienceDirect | ID: covidwho-1284491

ABSTRACT

The commentaries in the literature point out that cryptocurrencies, particularly Bitcoin, provide safe haven features to investors. The advent of COVID-19 pandemic offers a perfect opportunity to test this hypothesis. This study tries to validate this claim by examining the safe haven prowess of Bitcoin against measures of uncertainty (VIX, EPU, and Oil Shock). We further make a comparison between pre-and post-COVID-19 analyses. Results confirm that prior to COVID-19, Bitcoin was able to maintain its widely acknowledged characteristics. However, the post COVID-19 announcement upturned the tides previously identified.

3.
International Review of Financial Analysis ; : 101666, 2021.
Article in English | ScienceDirect | ID: covidwho-1023609

ABSTRACT

This study examines the safe haven prowess of gold against some exogenous shocks due to the COVID-19 pandemic. We further make a comparison of our findings with those obtained for the period before it. Our results confirm the potential of gold market to serve as a safe haven during the pandemic albeit with a higher effectiveness before the pandemic. Further results suggest that gold consistently offers better safe haven properties than the US stocks as well as other precious metals like Silver, Palladium and Platinum regardless of the period. Finally, we find that the predictive model that accounts for uncertainties outperforms the benchmark model that ignores the same both for the in- and out-of-sample forecast analyses.

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