Can Bitcoin and Gold Have Dynamic Hedging and Safe Haven Capabilities Against the BRICS Plus Stock Market Indices During Global Crises? An Evidence from a Time-Varying Copula Approach

Abstract

This study investigates how gold and Bitcoin can mitigate risk for investors in the BRICS Plus economies (Brazil, Russia, India, China, South Africa, and invited members: Egypt, Argentina, Saudi Arabia, and the United Arab Emirates). We employ a time-varying copula approach to analyze the safe haven, hedging, and diversification abilities of these assets against the BRICS Plus stock market indices for the period from January 4, 2016, to January 5, 2024. This timeframe encompasses significant events including the COVID-19 pandemic, the Russia–Ukraine conflict, and the Silicon Valley Bank collapse. Results show that during normal periods, both gold and Bitcoin act as diversifiers. However, during crises, their dynamics change, revealing their effectiveness as risk mitigators. Gold emerges as a strong diversifier and safe haven, particularly for Russia, India, Argentina, Saudi Arabia, and the United Arab Emirates during the COVID-19 pandemic. Bitcoin exhibits some safe-haven qualities, especially for South Africa and India, but its effectiveness varies by country. Our research suggests gold is a more consistent hedge than Bitcoin, especially during market downturns. This study offers practical insights for investors and policymakers. Investors in the BRICS Plus region can leverage these findings to make informed decisions by choosing between the stability of gold and the potential diversification of Bitcoin. Policymakers, on the other hand, can use this knowledge to develop strategies that help manage risk during volatile market conditions.