In search of Safe Havens for US and Scandinavian stock indices.

Abstract

Using correlation and rolling correlation, we determine that Gold, Bitcoin, Silver, Brent crude oil, Gas, and Corn fail as Safe haven assets for the US, Norwegian, Danish, and Swedish stock markets during the Covid-19 pandemic and the Russia-Ukraine crisis. Instead, these assets act as weak/strong diversifiers for selective indices during the sample period 2014-2023. In the long-term perspective (2014-2023), we find that Sweden is the only country where there exists a strong hedge (Gold) and a weak hedge (Natural gas and Corn). Our findings represent a deviation from previous literature, where a large part of our chosen commodities have been observed to contain safe haven and hedging properties for a wide range of countries. Investigating what causes these relationships indicates that stock and asset market returns are strongly interconnected. It also indicates that increased market volatility has a limited effect causing co-movements between Bitcoin and the Scandinavian markets and presenting a negative relationship between Brent crude oil against the US market and Silver against the Swedish market. Additionally, we find that the presence of negative real interest rates affects a selection of the relationships between the stock market and assets by either strengthening or weakening their safe haven properties.

The analysis is conducted using Microsoft Excel and R with the following packages “ggplot2”, “timetk”, “tseries”, “car”, “lmtest”, “zoo” and “PerformanceAnalytics”.