Investor Sentiment and Crash Risk in Safe Havens

  • Adnen Ben Nasr BESTMOD, Institute Supérieur de Gestion de Tunis, Université de Tunis, Tunisia
  • Matteo Bonato Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa
  • Riza Demirer 3Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, USA
  • Rangan Gupta Department of Economics, University of Pretoria, Pretoria, South Africa
Keywords: Investor sentiment, Safe haven assets, intraday returns, Crash risk.


This study examines the relationship between investor sentiment and intraday return dynamics for safe haven assets, with a particular focus on crash risk in these assets. Examining intraday returns for a wide range of safe havens proposed in the literature, we find that shocks to investor sentiment have a significant effect on safest havens, while the sentiment is heterogeneous both in terms of its size and direction. While the strongest effects of sentiment shocks are observed in the case of Gold, Swiss Francs and Japanese Yen, interestingly, we find that oil stands out from the rest of the pack, responding negatively to sentiment shocks, suggesting that positive shocks to sentiment (i.e. high fear) increase crash risk for this asset. Our findings also point to intra-safe haven spillover effects, with oil exhibiting a markedly different pattern. Investment and hedging implications are discussed next.


Download data is not yet available.


Agyei-Ampomah, S., Gounopoulos, D. & Mazouz, K. (2014). Does gold offer better protection against losses in sovereign debt bonds than other metals? Journal of Banking & Finance, 40, 507–521.
Baker, M. & Wurgler, J. (2006). Investor sentiment and the cross-section of stock returns. Journal of Finance, 61, 1645-1680.
Balcilar, M., Bonato, M., Demirer, R. & Gupta, R. (2017). The effect of investor sentiment on gold market return dynamics: Evidence from a nonparametric causality-in-quantiles approach. Resources Policy, 51, 77-84.
Barberis, N. & Huang, M. (2008). Stocks as lotteries: the implications of probability weighting for security prices. American Economic Review, 98, 2066–2100.
Baur, D. G. & Lucey, B. M. (2010). Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. The Financial Review, 45, 217–229.
Baur, D. G. & McDermott, T. K. (2010). Is gold a safe haven? International evidence. Journal of Banking and Finance, 34, 1886–1898.
Bernanke, B. (2016). The relationship between stocks and oil prices. Retrieved from Brookings:
Bredin, D., Conlon, T. & Poti, V. (2015). Does gold glitter in the long-run? Gold as a hedge and safe haven across time and investment horizon. International Review of Financial Analysis, 41, 320–328.
Capie, F., Mills, T. C. & Wood, G. (2005). Gold as a hedge against the dollar. Journal of International Financial Markets Institutions and Money, 15(4), 343–352.
Ciner, C., Gurdgiev, C. & Lucey, B. M. (2013). Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates. International Review of Financial Analysis, 29, 202–211.
Da, Z., Engelberg, J. & Gao, P. (2015). The Sum of All FEARS Investor Sentiment and Asset Prices. Review of Financial Studies, 28(1), 1-32.
De Long, J. B., Shleifer, A., Summers, L. H. & Waldmann, R. J. (1990). Noise trader risk in Financial markets. Journal of Political Economy, 98, 703-738.
Efron, B. & Tibshirani, R. J. (1993). An Introduction to the Bootstrap. New York: Chapman & Hall.
Fatum, R. & Yamamoto, Y. (2016). Intra-safe haven currency behavior during the global financial crisis. Journal of International Money and Finance, 66, 49–64.
Fernandez-Perez, A., Frijns, B., Fuertes, A. & Miffre, J. (2018). The skewness of commodity futures returns. Journal of Banking and Finance, 86, 143–158.
Grisse, C. & Nitschka, T. (2015). On financial risk and the safe haven characteristics of Swiss franc exchange rates. Journal of Empirical Finance, 32, 153–164.
Hood, M. & Malik, F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics, 22, 47–52.
Huang, D., Jiang, F., Tu, J. & Zhou, G. (2015). Investor sentiment aligned: a powerful predictor of stock returns. Review of Financial Studies, 28, 791-837.
Kaul, A. & Sapp, S. (2006). Y2K fear and safe haven trading of the US dollar. Journal of International Money and Finance, 25, 760–797.
Kräussl, R., Lehnert, T. & Senulytė, S. (2016). Euro crash risk. Journal of Empirical Finance, 38, 417–428.
Mitton, T. & Vorkink, K. (2007). Equilibrium underdiversification and the preference for skewness. The Review of Financial Studies, 20, 1255–1288.
Newey, W. K. & West, K. D. (1987). A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica, 55(3), 703–708.
Pesaran, H. H. & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics Letters, 58, 17-29.
Ranaldo, A. & Soderlind, P. (2010). Safe Haven Currencies. Review of Finance, 14, 385–407.
Reboredo, J. C. (2013). Is gold a safe haven or a hedge for the US dollar? Implications for risk management. Journal of Banking & Finance, 37, 2665–2676.
How to Cite
Nasr, A. B., Bonato, M., Demirer, R., & Gupta, R. (2019). Investor Sentiment and Crash Risk in Safe Havens. Journal of Economics and Behavioral Studies, 10(6A(J), 97-108.
Research Paper