Can gold and bitcoin hedge against the COVID-19 related news sentiment risk? New evidence from a NARDL approach

Xuehong Zhu; Zibo Niu; Hongwei Zhang; Jiaxin Huang; Xuguang Zuo

doi:10.1016/j.resourpol.2022.103098

Can gold and bitcoin hedge against the COVID-19 related news sentiment risk? New evidence from a NARDL approach

Resour Policy. 2022 Dec:79:103098. doi: 10.1016/j.resourpol.2022.103098. Epub 2022 Oct 31.

Authors

Xuehong Zhu^{1

2}, Zibo Niu^{1

2}, Hongwei Zhang^{3

2}, Jiaxin Huang¹, Xuguang Zuo¹

Affiliations

¹ School of Business, Central South University, Changsha, 410083, China.
² Institute of Metal Resources Strategy, Central South University, Changsha, 410083, China.
³ School of Mathematics and Statistics, Central South University, Changsha, 410083, China.

Abstract

The COVID-19 pandemic has led to extensive news coverage, causing investor sentiment to swing, which has further increased financial market price volatility. There is an increasing need to find a hedge against sentiment risk. This paper examines the hedge capabilities of gold and Bitcoin against COVID-19-related news sentiment (CNS) risk under a nonlinear autoregressive distributed lag (NARDL) model. Our empirical results reveal that there is an obvious asymmetric effect from the CNS on gold prices in the short run and that the decrease in the COVID-19-related news index would have a greater impact on gold prices than when it increases. The impact of CNS on Bitcoin prices is asymmetric in the long and short term, especially in the long term. In addition, we conclude that gold is a hedge against CNS risk in the long term, and the hedging effect of Bitcoin is mainly reflected in the short-term.

Keywords: Bitcoin; COVID-19 news; Gold; Hedge; NARDL model.

Publication types

News