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      Is gold a hedge or a safe-haven asset in the COVID–19 crisis?

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      Embargo Lift Date: 2024-09-30
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      Author(s)
      Akhtaruzzaman, M.
      Boubaker, S.
      Lucey, B. M.
      Şensoy, Ahmet
      Date
      2021-09
      Source Title
      Economic Modelling
      Print ISSN
      0264-9993
      Publisher
      Elsevier BV
      Volume
      102
      Pages
      105588-1 - 105588-26
      Language
      English
      Type
      Article
      Item Usage Stats
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      Abstract
      This study examines the role of gold as a hedge or safe-haven asset in different phases of the COVID-19 pandemic crisis, corresponding to the timing of fiscal and monetary stimuli to support the weakened economy. Using high-frequency data, the results show that gold served as a safe-haven asset for stock markets during Phase I (December 31, 2019–March 16, 2020) of the pandemic. However, gold lost its safe-haven role during Phase II (March 17−April 24, 2020). The optimal weights of gold in S&P 500, Euro Stoxx 50, Nikkei 225, and WTI crude oil portfolios significantly increased during Phase II, suggesting that investors expanded investment in gold as a ‘flight-to-safety asset’ during the crisis. Further, hedging costs increased significantly during Phase II. These findings provide insight for individual and institutional investors and guidance to policymakers, regulators, and media on how gold evolved as a hedge and safe-haven asset in different phases of the pandemic.
      Keywords
      Covid–19
      Gold
      Safe-haven asset
      Hedge
      Financial crisis
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      http://hdl.handle.net/11693/77441
      Published Version (Please cite this version)
      https://doi.org/10.1016/j.econmod.2021.105588
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