Portfolio Protection in a Pandemic : The Effectiveness of Safe Haven Assets on the Swedish Market

Sammanfattning

This study examines whether gold, silver and oil function as effective safe haven assets when included in equity portfolios on the Swedish stock market during the COVID-19 pandemic. To investigate this, the full sample period was divided into three sub-periods, pre crisis (2019), during crisis (2020) and post-crisis (2021) allowing the assets to be evaluated under normal, distressed and recovery conditions. Daily total return data for eight ICB industry indices representing the Swedish market were collected from LSEG Datastream together with gold, silver and oil. Three portfolio allocation strategies were constructed: an equally weighted (EQW) benchmark, maximum Sharpe ratio (SR) portfolio and a global minimum variance (GMV) portfolio. Each portfolio was evaluated using mean excess return, standard deviation, lower partial standard deviation, Sharpe ratio, Sortino ratio, Value at Risk and Conditional Value at Risk. The results were tested through a Fama-French five-factor regression as well as a robustness test on monthly data. The findings suggest that gold acted as a strong safe haven, displaying a near-zero market beta of -0.034 and substantially reducing portfolio risk during the crisis. Silver behaved as a diversifier or weak safe haven due to its higher volatility and industrial exposure. Oil failed to provide protection and instead behaved as a cyclical risk asset that performed strongly only during the recovery. Consequently, the effectiveness of a safe haven is highly dependent on both the specific asset and the chosen allocation strategy. The results on the Swedish market support existing literature indicating that gold remains the most reliable safe haven during periods of market stress.