Cryptocurrency Safe Haven Property against Indonesian Stock Market During COVID-19

Mudita Gunawan; Achmad Herlanto Anggono

doi:10.14414/jebav.v24i1.2661

Authors

Mudita Gunawan Institut Teknologi Bandung
Achmad Herlanto Anggono Institut Teknologi Bandung

DOI:

https://doi.org/10.14414/jebav.v24i1.2661

Keywords:

cryptocurrency, safe haven, COVID-19, Jakarta composite index, DCC-GARCH model

Abstract

Safe-haven assets conserve their value or grow against another asset or portfolioduring market turmoil. Indonesian stock market, represented by the Jakarta compositeÂ index (JKSE), plunged in price because of COVID-19, pushing investors to look forÂ safe-havens. The cryptocurrency began to be perceived as a store of value as indicatedÂ by the transaction volume increase; hence it was expected to be a safe haven asset.Â However, cryptocurrencyâ€™s high price volatility cast doubts on its store of valueÂ effectiveness, prompting inspection for its safe haven property as well. This researchÂ aimed to predict the assets' risk and return plus investigate whether cryptocurrencyÂ is safe haven assets against the Indonesian stock market during COVID- 19. DailyÂ closing prices of JKSE, Bitcoin, Ethereum, Litecoin, and Ripple were used, then theÂ GARCH model was implemented in the forecasting. DCC-GARCH model, followedÂ by dummy variable regression, will be applied to the return data to evaluate the safeÂ haven property. The prediction projected Bitcoin as the most profitable asset andRipple as the riskiest. The analysis and robustness test suggested that none of theseÂ cryptocurrencies were safe haven assets during the whole observation. This indicatesÂ that investors who intend to seek safe haven investments were advised againstÂ investing in these cryptocurrencies.

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