A Safe Haven Index

The literature has identified and studied several safe haven assets individually but has not yet considered the collective dynamics of these assets. In this paper, we introduce a novel Safe Haven Index (SHI) to track the dynamics of safe haven assets. The index is based on the time-varying first principal component of all constituent assets and can be updated without changing past values. The empirical analysis illustrates that safe haven assets protect against extreme stock market losses and co-move with the stock market over longer horizons. • Introduce a Safe Haven Index (SHI) based on key safe haven assets. • SHI is the time-varying first principal component of safe haven assets. • SHI rises during crashes, confirming its protective role in downturns. • SHI explains ∼ 50% of variance in safe haven assets, showing strong commonality. • SHI reveals regime shifts in safe haven asset roles across financial crises.