6533b7d1fe1ef96bd125cbef
RESEARCH PRODUCT
When Bitcoin Has the Flu: On Bitcoin’s Performance to Hedge Equity Risk in the Early Wake of the COVID-19 Outbreak
Klaus GrobysKlaus Grobyssubject
Potential impactEquity riskCoronavirus disease 2019 (COVID-19)Financial economicsbusiness.industryEconomicsOutbreakTail riskHedge (finance)businessFinTechdescription
Using the coronavirus COVID-19 outbreak as a set-up for a quasi-experiment, this study derives novel insights on the dynamic correlation between Bitcoin and U.S. stocks. Given the unprecedented scale of infections and the nature of the virus, the potential impact on the dynamic correlation was unpredictable and therefore uncertain. Using a difference-in-differences setting, the dynamic correlation between Bitcoin and stocks is controlled for the dynamic correlation between gold and stocks. This study finds that Bitcoin performed poorly in hedging this tail risk.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2020-01-01 | SSRN Electronic Journal |