Bitcoin's hedging attributes against equity market volatility: empirical evidence during the COVID-19 pandemic

Abstract

Purpose

The purpose of this paper is to analyze the hedging capacity of Bitcoin in relation to the S&P 500 index during the COVID-19 pandemic.

Design/methodology/approach

In order to investigate the hedging features of Bitcoin in relation to the S&P 500 index during the COVID-19 pandemic, the authors use the Granger causality applied on a daily sample of observations ranging from January 1st, 2019 to December 31st, 2020. As robustness checks, the authors use autoregressive models to test the validity of the findings.

Findings

Using time series of daily data from 1st January 2019 to 31st December 2020, the results show that Bitcoin is not considered as a safe haven because it moves at the same pace as the S&P 500. As a robustness check, the authors use the exponential GARCH model and confirm our previous findings. Overall, the study contributes to the debate on both COVID-19's impact on financial systems and the hypothesis of Bitcoin being a safe haven during extreme global crises.

Originality/value

The study contributes to the debate on both COVID-19's impact on financial systems and the hypothesis of Bitcoin being a safe haven during extreme global crises.

Citation

Grira, J., Guizani, S. and Kahloul, I. (2022), "Bitcoin's hedging attributes against equity market volatility: empirical evidence during the COVID-19 pandemic", Journal of Risk Finance, Vol. 23 No. 5, pp. 605-618. https://doi.org/10.1108/JRF-01-2022-0003