Can cryptocurrencies be a safe haven: a tail risk perspective analysis

【Author】 Feng, Wenjun; Wang, Yiming; Zhang, Zhengjun

【Source】APPLIED ECONOMICS

【影响因子】1.916

【Abstract】Cryptocurrencies are one of the most promising financial innovations of the last decade. Different from major stock indices and the commodities of gold and crude oil, the cryptocurrencies exhibit some characteristics of immature market assets, such as auto-correlated and non-stationary return series, higher volatility, and higher tail risks measured by conditional Value at Risk (VaR) and conditional expected shortfall (ES). Using an extreme-value-theory-based method, we evaluate the extreme characteristics of seven representative cryptocurrencies during 08 August 2015-01 August 2017. We find that during the sub-period of 01 August 2016-01 August 2017, there are finite loss boundaries for most of the selected cryptocurrencies, which are similar to the commodities, and different from the stock indices. Meanwhile, we find that left tail correlations are much stronger than right tail correlations among the cryptocurrencies, and tail correlations increased after August 2016, suggesting high and growing systematic extreme risks. We also find that cryptocurrencies to be both left tail independent, and cross tail independent with four selected stock indices, which implies part of the safe-haven function of the cryptocurrencies, indicating their ability to be a great diversifier for the stock market as gold, but not enough to be a tail hedging tool like gold.

【Keywords】Cryptocurrency; tail risk; tail correlation; diversification; hedge; C13; C22; G10; G11; G15

【发表时间】2018

【收录时间】2022-01-02

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