The Link between Asset Value and Fear Sentiment during Covid-19 Pandemic

Yıl 2022, , 137 - 153, 29.07.2022

İsmail Canöz

https://doi.org/10.17233/sosyoekonomi.2022.03.07

Cited By: 4

Öz

This article explores the role of global financial instruments as hedging or safe-haven assets in the Covid-19 pandemic crisis, which has weakened the global economy, by linking it to the investor’s fear sentiment perspective. Correspondingly, it analyses the effects of shocks in the VIX index, which represents the global investor’s fear sentiment, on shocks in some investment assets during the ongoing pandemic. Eight major financial instruments from different asset classes are tested along with the VIX index to achieve this goal. The analysis covers a 156-week time series and assays the variables from symmetric and intertemporal perspectives. The findings show that the most robust asset is the American Dollar fiat currency, followed partly by the Euro and gold. BTC also has been safe for a short time.

Anahtar Kelimeler

Covid-19 Pandemic, Fear Sentiment, Financial Assets, Safe-Haven, Portfolio Selection, the Rolling Window Estimation

Covid-19 Pandemisi Boyunca Varlık Değeri ve Korku Hissiyatı Arasındaki Bağlantı

Öz

Bu makale, küresel ekonomiyi zayıflatan Covid-19 pandemi krizinde riskten korunma veya güvenli liman varlıkları olarak küresel finansal araçların rolünü yatırımcının korku hissiyatı perspektifiyle ilişkilendirerek araştırmaktadır. Buna bağlı olarak, küresel yatırımcının korku hissiyatını temsil eden VIX endeksindeki şokların, devam eden pandemi sırasında bazı yatırım varlıklarındaki şoklar üzerindeki etkilerini analiz etmektedir. Bu amaca ulaşmak için farklı varlık sınıflarından sekiz ana finansal araç, VIX endeksi ile birlikte test edilmektedir. Analiz, 156 haftalık bir zaman serisini kapsamakta ve değişkenleri simetrik ve zamanlar arası perspektiflerden tahlil etmektedir. Bulgular, en sağlam varlığın Amerikan Doları itibari para birimi olduğunu, ardından kısmen Euro ve altının geldiğini göstermektedir. BTC’nin ise kısa süreliğine sağlam durduğu söylenebilir.

Anahtar Kelimeler

Covid-19 Pandemisi, Korku Hissiyatı, Finansal Varlıklar, Güvenli Liman, Portföy Seçimi, Hareketli Pencere Tahmini

Kaynakça

• Acik, A. et al. (2019), “Time-varying causality between exchange rate and container handling volume in Turkish ports”, Transport & Logistics: The International Journal, 19(46), 1-11.
• Akhtaruzzaman, M. et al. (2021), “Is gold a hedge or a safe-haven asset in the COVID-19 crisis?”, Economic Modelling, 102, 105588.
• AlAli, M.S. (2020), “Safe haven assets: Are they still safe during Covid-19 pandemic period?”, European Journal of Economic and Financial Research, 4(1), 91-98.
• Aslam, F. et al. (2020), “On the Efficiency of Foreign Exchange Markets in times of the COVID-19 Pandemic”, Technological forecasting and social change, 161, 120261.
• Baker, S.R. et al. (2020), “The unprecedented stock market reaction to COVID-19”, The Review of Asset Pricing Studies, 10(4), 742-758.
• Barnett, A. et al. (2014), “Forecasting UK GDP growth, inflation and interest rates under structural change: a comparison of models with time-varying parameters”, International Journal of Forecasting, 30(1), 129-143.
• Baur, D.G. & B.M. Lucey (2010), “Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold”, Financial Review, 45(2), 217-229.
• Bolukbas, M. (2019), “Kamu büyüklüğü işsizliğin ve genç işsizliğin nedeni midir? Türkiye örneği”, Aydın İktisat Fakültesi Dergisi, 3(2), 1-17.
• Brunnermeier, M.K. et al. (2020), “Banks’ noninterest income and systemic risk”, The Review of Corporate Finance Studies, 9(2), 229-255.
• Campbell, J.Y. et al. (2018), “An intertemporal CAPM with stochastic volatility”, Journal of Financial Economics, 128(2), 207-233.
• CBOE (2021), <https://www.cboe.com/tradable_products/vix/>, 22.10.2021.
• Charemza, W. & D.F. Deadman (1997), New Directions in Econometric Practice, Edward Elgar Publishing.
• Cheema, M.A. et al. (2020), “The 2008 global financial crisis and COVID-19 pandemic: How safe are the safe haven assets?”, Covid Economics, Vetted and Real-Time Papers, (34), 88-115.
• Chemkha, R. et al. (2021), “Hedge and safe haven properties during COVID-19: Evidence from Bitcoin and gold”, The Quarterly Review of Economics and Finance, 82, 71-85.
• Chen, C. et al. (2020), “Fear sentiment, uncertainty, and bitcoin price dynamics: The case of COVID-19”, Emerging Markets Finance and Trade, 56(10), 2298-2309.
• Conlon, T. & R. McGee (2020), “Safe haven or risky hazard? Bitcoin during the COVID-19 bear market”, Finance Research Letters, 101607.
• Conlon, T. et al. (2020), “Are Cryptocurrencies a Safe Haven for Equity Markets? An International Perspective from the COVID-19 Pandemic”, Research in International Business and Finance, 101248.
• Deger, M.K. & U.K. Pata (2017), “Türkiye’de Dış Ticaret ve Karbondioksit Salınımı arasındaki İlişkilerin Simetrik ve Asimetrik Nedensellik Testleriyle Analizi”, Doğuş Üniversitesi Dergisi, 18(1), 31-44.
• Disli, M. et al. (2021), “In search of safe haven assets during COVID-19 pandemic: An empirical analysis of different investor types”, Research in International Business and Finance, 58, 101461.
• Dutta, A. et al. (2020), “COVID-19 and oil market crash: Revisiting the safe haven property of gold and Bitcoin”, Resources Policy, 69, 101816.
• Engle, R.F. & C.W. Granger (1987), “Co-integration and error correction: representation, estimation, and testing”, Econometrica: Journal of the Econometric Society, 55(2), 251-276.
• Ertekin, M. & M. Kirca (2017), “Türkiye’de kentleşme ve iktisadi büyüme ilişkisinin zamanla değişen nedensellik analizi yöntemiyle incelenmesi”, Journal of Emerging Economies and Policy, 2(2), 44-63.
• Fleming, J. et al. (1998), “Information and volatility linkages in the stock, bond, and money markets”, Journal of Financial Economics, 49(1), 111-137.
• Granger, C.W. & G. Yoon (2002), “Hidden Cointegration”, Economics Working Paper, (2002-02).
• Granger, C.W. (1969), Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 37(3), 424-438.
• Granger, C.W. (1988), “Some recent development in a concept of causality”, Journal of Econometrics, 39(1-2), 199-211.
• Grisse, C. & T. Nitschka (2015), “On financial risk and the safe haven characteristics of Swiss franc exchange rates”, Journal of Empirical Finance, 32, 153-164.
• Groenewold, N. & P. Fraser (1999), “Time-varying estimates of CAPM betas”, Mathematics and Computers in Simulation, 48(4-6), 531-539.
• Hacker, R.S. & A. Hatemi-J (2006), “Tests for Causality between Integrated Variables Using Asymptotic and Bootstrap Distributions: Theory and Application”, Applied Economics, 38(13), 1489-1500.
• Hatemi-J, A. (2003), “A New Method to Choose Optimal Lag Order in Stable and Unstable VAR Models”, Applied Economics Letters, 10(3), 135-137.
• Hatemi-J, A. (2012), “Asymmetric Causality Tests with an Application”, Empirical Economics, 43(1), 447-456.
• Hwang, S. & S.E. Satchell (2010), “How loss averse are investors in financial markets?”, Journal of Banking & Finance, 34(10), 2425-2438.
• Inglesi-Lotz, R. et al. (2014), “Time-varying causality between research output and economic growth in US”, Scientometrics, 100(1), 203-216.
• Ji, Q. et al. (2020), “Searching for safe-haven assets during the COVID-19 pandemic”, International Review of Financial Analysis, 101526.
• Kamisli, M. et al. (2017), “Bölgesel İslami hisse senedi endeksleri arasındaki ilişkilerin analizi”, Uluslararası Yönetim İktisat ve İşletme Dergisi, 13(5), 574-587.
• Kaul, A. & S. Sapp (2006), “Y2K fears and safe haven trading of the US dollar”, Journal of International Money and Finance, 25(5), 760-779.
• Kinateder, H. et al. (2021), “Safe haven in GFC versus COVID-19: 100 turbulent days in the financial markets”, Finance Research Letters, 43, 101951.
• Kristoufek, L. (2020), “Grandpa, grandpa, tell me the one about Bitcoin being a safe haven: Evidence from the COVID-19 pandemics”, arXiv preprint arXiv:2004.00047.
• Lee, J. & M.C. Strazicich (2003), “Minimum Lagrange multiplier unit root test with two structural breaks”, Review of Economics and Statistics, 85(4), 1082-1089.
• Liu, Z. et al. (2020), “Fears for COVID-19: The crash risk of stock market”, arXiv preprint arXiv:2009.08030.
• Mariana, C.D. et al. (2021), “Are Bitcoin and Ethereum safe-havens for stocks during the COVID-19 pandemic?”, Finance Research Letters, 38, 101798.
• Mensi, W. et al. (2020), “Impact of COVID-19 outbreak on asymmetric multifractality of gold and oil prices”, Resources Policy, 69, 101829.
• Merton, R.C. (1973), “An intertemporal capital asset pricing model”, Econometrica: Journal of the Econometric Society, 41(5), 867-887.
• Ozer, M. & M. Kirca (2018), “Türkiye’de Cari Açık ile Reel Döviz Kuru Arasındaki Simetrik ve Asimetrik Nedensel İlişkilerin Analizi”, 1st International Economics and Business Symposium (ECONBUSS), (25-27 October), Gaziantep, 190-200.
• Papadamou, S. et al. (2020), “Direct and Indirect Effects of COVID-19 Pandemic on Implied Stock Market Volatility: Evidence from Panel Data Analysis”, MPRA Paper 100020, University Library of Munich, Germany.
• Perron, P. (1989), “The great crash, the oil price shock, and the unit root hypothesis”, Econometrica: Journal of the Econometric Society, 57(6), 1361-1401.
• Raheem, I.D. (2021), “COVID-19 pandemic and the safe haven property of Bitcoin”, The Quarterly Review of Economics and Finance, 81, 370-375.
• Rubbaniy, G. et al. (2021), “Are ESG stocks safe-haven during COVID-19?”, Studies in Economics and Finance, 39(2), 239-255.
• Salisu, A.A. et al. (2020), “The COVID-19 global fear index and the predictability of commodity price returns”, Journal of Behavioral and Experimental Finance, 27, 100383.
• Stock, J.H. & M.W. Watson (1996), “Evidence on structural instability in macroeconomic time series relations”, Journal of Business & Economic Statistics, 14(1), 11-30.
• Su, C.W. et al. (2022), “Can Bitcoin be a safe haven in fear sentiment?”, Technological and Economic Development of Economy, 1-22.
• Tang, C.F. (2008), “Wagner’s law versus Keynesian hypothesis: New evidence from recursive regression-based causality approaches”, The IUP Journal of Public Finance, 6(4), 29-38.
• Toda, H.Y. & T. Yamamoto (1995), “Statistical Inference in Vector Autoregressions with Possibly Integrated Processes”, Journal of Econometrics, 66(1-2), 225-250.
• Tversky, A. & D. Kahneman (1991), “Loss aversion in riskless choice: A reference-dependent model”, The Quarterly Journal of Economics, 106(4), 1039-1061.
• Wesseh Jr, P.K. & B. Zoumara (2012), “Causal independence between energy consumption and economic growth in Liberia: Evidence from a non-parametric bootstrapped causality test”, Energy Policy, 50, 518-527.
• Yarovaya, L. et al. (2020), “The COVID-19 Black Swan Crisis: Reaction and Recovery of Various Financial Markets”, Available at SSRN 3611587.
• Yilanci, V. & Ş. Bozoklu (2014), “Türk Sermaye Piyasasında Fiyat ve İşlem Hacmi İlişkisi: Zamanla Değişen Asimetrik Nedensellik Analizi”, Ege Academic Review, 14(2), 211-220.