Application of Stochastic Dominance in Hedging Decision during COVID-19 Pneumonia Emergency Events
Wen Hsiang Chiu, Shih‐Wei Hung · Trends journal of sciences research · 2021
With the rise of virtual currencies, Bitcoin has gradually become one of the safe-haven tools in the financial market. During situations of worldwide outbreaks of an infectious disease, investors pay special attention to asset allocation. Therefore, this study discusses the outbreak of COVID-19 in China, which has affected financial markets and has led investors to avoid risks through investing in traditional financial products or Bitcoin. We found that during the time of the COVID-19 pneumonia, Bitcoin and gold futures were used for hedging transactions in the face of unstable Chinese market conditions and under the pursuit of investors' maximization of return on in-vestment. Furthermore, there was also no difference between hedging through Bitcoin or gold futures; however, investors had a preference to invest in gold futures for hedging under the as-sumption that an investor was absolutely risk averse.