(SAGE Publications Inc, 2020-05-26) Naeem MA; Hasan M; Arif M; Shahzad SJH
We compare the hedging, safe-haven, and diversification potential of gold and Bitcoin for different investment styles and industry portfolios in the United States. We find that gold is at least a weak hedge for the style and industry portfolios except for utilities, energy, and telecom. The hedging potential of gold is comparatively higher for large-cap portfolios, whereas Bitcoin offers minimal hedging effectiveness. However, Bitcoin shows hedging potential for the noncyclical industries. Although investors need a higher amount of investment to hedge the downside risk using gold, it still is a superior hedging instrument compared with Bitcoin. Finally, the analysis using the conditional diversification approach shows that gold is a superior and stable diversifier for style and industry portfolios. Overall, our findings provide evidence of superior safe-haven and hedging potential of gold over Bitcoin.
