Is cryptocurrency a hedge, safe haven, diversifier against Thailand, Indonesia, Philippine stock market on pre-COVID-19 and during COVID-19?

Abstract

This research study whether cryptocurrencies act as a hedge, safe haven or diversifier against Thailand, Philippines, and Indonesia stock exchange market. Using DCC-GARCH model and hypothesis test, we examine the hedge ratio and the conditional correlation between cryptocurrencies and TIP’s stock exchange market. The sample cover data on the return of the TIP’s index, Bitcoin, Ethereum, Tether and Litecoin from 1st January 2016 to 31st December 2021. The empirical results show that traditional cryptocurrencies, such as Bitcoin and Litecoin can act as diversifier, Ethereum can act as hedge instrument in PSEI index. Tether can act as the hedge and safe haven in PSEI and JKSE index. The safe-haven capability of Tether can change across market condition. The benefits of this research are to help investors the important understanding into diversification of cryptocurrencies. Moreover, authorities and governments would be interested in our findings if they were to engage in a deeper discussion on the role of cryptocurrencies in financial markets. This study contributes to the continuing discussion regarding the investment potential of cryptocurrencies.