To read this content please select one of the options below:

Price efficiency and safe-haven property of Bitcoin in relation to stocks in the pandemic era

Natalia Diniz-Maganini (Department of Accounting, Finance and Controll, FGV EAESP, Fundacao Getulio Vargas, Sao Paulo School of Business Administration, Sao Paulo, Brazil)
Abdul A. Rasheed (Department of Management, College of Business Administration, University of Texas at Arlington, Arlington, Texas, USA)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 23 December 2021

Issue publication date: 22 April 2022

254

Abstract

Purpose

When investors experience extreme uncertainty, they seek “safe havens” to reduce their risk, to limit their losses and to protect the value of their portfolios. The purpose of this paper is to examine the safe-haven properties of Bitcoin compared to the stock market.

Design/methodology/approach

Based on intraday data, this study compares the price efficiencies of Bitcoin and Morgan Stanley Capital Index (MSCI) using Multifractal Detrended Fluctuation Analysis for the second half of 2020. This study then evaluates Bitcoin’s safe-haven property using Detrended Partial-Cross-Correlation Analysis (DPCCA).

Findings

This study finds that the price efficiency of Bitcoin is lower than that of MSCI. Further, Bitcoin was not a safe haven at any time for the MSCI index. The net cross-correlations between Bitcoin and MSCI are weak and they vary at different time scales.

Research limitations/implications

The behavior of market prices varies over time. Therefore, it is important to replicate this study for other time periods.

Social implications

The paper sheds light on the price behavior of Bitcoin during a period of instability. The results suggest that the construction of portfolios should differ based on the time horizons of the investors.

Originality/value

The authors compare Bitcoin against a global equity index instead of a specific country index or commodity. They also demonstrate the applicability of DPCCA in finance research.

Keywords

Citation

Diniz-Maganini, N. and Rasheed, A.A. (2022), "Price efficiency and safe-haven property of Bitcoin in relation to stocks in the pandemic era", Studies in Economics and Finance, Vol. 39 No. 3, pp. 403-418. https://doi.org/10.1108/SEF-06-2021-0235

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

Related articles