Global uncertainty and potential shelters : gold, bitcoin, and currencies as weak and strong safe havens for main world stock markets

This article investigates fve safe-haven asset responses from 2014 to 2022, includ‑ ing the unprecedented COVID-19 crisis, Russian invasion of Ukraine, and sharp US inter‑ est rate increases of 2015 and 2022. We apply the unique approach of the multivariate factor stochastic volatility (MSV) model, which is extremely efcient for fnancial market analysis and allows us to conduct dynamic factor analysis of safe-haven relationships that cannot be observed directly. The research sample consists of fve prospective safe-haven assets-gold, bitcoin, the euro, the Japanese yen, and the Swiss franc-and fve primary world stock market indices-the S&P 500, Financial Times Stock Exchange (FTSE) 100, DAX, STOXX Europe 600, and Nikkei 225. Our fndings are useful for inves‑ tors searching for the best safe-haven assets among gold, bitcoin, and currencies to hedge against fnancial turmoil in global stock markets. Our unique fndings suggest that safe-haven efects work diferently for gold and the yen; that is, the Japanese yen acts as the strongest safe haven across all stock indices. Bitcoin is not a strong safe-haven currency since it has zero days of negative correlations with the con‑ sidered stock indices, but it is a weak safe-haven during times of fnancial distress. Consequently, we state that strong and weak safe-haven properties vary across time and place. The novelty of our study lies in the methodological complexity of the MSV model (used for the frst time to fnd the best safe-haven asset properties), dynamic factor analysis, a long-term research sample covering the Russian invasion of Ukraine in 2022, and an international investor perspective focusing on the world's leading stock markets. We extend earlier studies by analyzing the interrelations of the world's lead‑ ing stock market indices with fve potential safe-haven assets during the long period of 2014-2022 and using a unique dynamic factor analysis to show the diferentiated behaviors of the Japanese yen and gold. Additionally, the main innovative contribution is a new framework of weak and strong safe-haven asset classifcations not previously applied in the literature.