Is Bitcoin a Safe Haven for Indian Investors? A GARCH Volatility Analysis

Title

Is Bitcoin a Safe Haven for Indian Investors? A GARCH Volatility Analysis

Creator

Murty S.; Victor V.; Fekete-Farkas M.

Description

This paper attempts to understand the dynamic interrelationships and financial asset capabilities of Bitcoin by analysing several aspects of its volatility vis-a-vis other asset classes. This study aims to analyse the volatility dynamics of the returns of Bitcoin. An asymmetric GARCH model (EGARCH) is used to investigate whether Bitcoin may be useful in risk management and ideal for risk-averse investors in anticipation of negative shocks to the market (leverage effect). This paper also examines Bitcoin as an investment and hedge alternative to gold as well as NSE NIFTY using a multivariate DCC GARCH model. DCC GARCH models are also used to check whether correlation (co-movement) between the markets is time-varying, examine returns and volatility spillovers between markets and the effect of the outbreak of COVID-19 in India on the investigated markets. The results show that given the supply of Bitcoin is fixed, low returns realisation is equivalent to excess supply over demand wherein investors are selling off Bitcoin during bad times. The positive co-movement between Bitcoin and gold during the COVID-19 outbreak shows that investors perceived Bitcoin as a relatively safe investment. However, overall analysis shows that Bitcoin was not considered a safe hedge and an investment option by Indian investors during the study period. 2022 by the authors.

Source

Journal of Risk and Financial Management, Vol-15, No. 7

Date

2022-01-01

Publisher

MDPI

Subject

Bitcoin; DCC GARCH; EGARCH; gold; volatility spill over

Coverage

Murty S., Department of Economics, CHRIST (Deemed to be University, Bangalore, 560029, India; Victor V., Accounting, Economics and Finance Area, T A Pai Management Institute, Manipal Academy of Higher Education, Manipal, 576104, India; Fekete-Farkas M., Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, Godollo, 2100, Hungary

Rights

All Open Access; Gold Open Access; Green Open Access

Relation

ISSN: 19118074

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.3390/jrfm15070317

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