The Impact of COVID-19 and the Russia–Ukraine Conflict on the Relationship Between the US Islamic Stock Index, Bitcoin, and Commodities

Abstract

In this article, the MGARCH-DCC model is utilised to compare the usefulness of Bitcoin, gold, and crude oil as a hedge and safe haven for the US Islamic stock index. We utilised daily data from August 2014 to April 2022, which covers the most recent COVID-19 epidemic and the Russia-Ukraine conflict. We find the dynamic correlation between Bitcoin and the US Islamic stock index to be low and often negative during major economic and political events, showing that Bitcoin is a safe haven and hedging instrument, especially during the pandemic period. However, we find that Bitcoin is very volatile, limiting its use as a safe haven and hedging instrument compared to gold. Gold is more stable and negatively correlated with the US Islamic stock index, making it more appropriate as a diversifier and hedging instrument. Adding gold to the US Islamic stock index portfolio reduces the portfolio’s risk.