Bitcoin and Gold as Hedging Instruments for ASEAN-5 stock markets
Zhalindri Noor Adjani

Master of Management, University of Indonesia
Jalan Salemba Raya Nomor 4, Jakarta 10430, Indonesia

Abstract

The development of hedging strategies using commodity and cryptocurrency has been a topic of academic and practical interest. An optimal strategy increases the efficiency of risk management and minimizes the costs of hedging. This paper examines the time-varying optimal hedging ratios for the ASEAN-5 stock market, hedged with gold and bitcoin. We determine the best hedging instrument using a rolling-window analysis and DCC-GARCH model. The analyses resulted in hedging effectiveness criterion. The daily data cover the period from January 2019 to December 2021. Our findings are robust to the distribution assumption and to the use of DCC-GARCH model in examining different refits. Finally, this study provides an invaluable starting point to examine the dynamics hedging.

Keywords: DCC-GARCH-Hedging effectiveness ratio-ASEAN-5 stock markets-Gold-Bitcoin

Topic: Economics