Investigating Cryptocurrencies As a Diversifier Asset for the Saudi Stock Market (TASI)

Abstract

This study will shed light on cryptocurrencies, specifically the Bitcoin, as a diversifier in the Saudi stock market. Cryptocurrencies have overwhelmingly become a widespread and interesting phenomenon, attracting the attention of academic researchers as well as financial and governmental entities. Investors need to diversify their investments in different markets to manage their risks, particularly during times of crises, which requires understanding of the interconnections various markets. Moreover, the findings of this study will assist Saudi financial officials in better understanding the risks and rewards of cryptocurrencies and exploring investment opportunities more efficiently. We examine the hedging and diversifier properties of cryptocurrencies against TASI using the GARCH (1,1) model covering the daily data from January 1, 2018, to December 31, 2021. Our findings confirm that the Bitcoin can be used as a diversifier in the Saudi stock market.