Connectedness between Defi assets and equity markets during COVID-19: A sector analysis

Imran Yousaf, Francisco Jareño and Marta Tolentino

Technological Forecasting and Social Change, 2023, vol. 187, issue C

Abstract: This paper explores the dynamic connectedness between Defi assets and sector stock markets focused around the COVID-19 pandemic crisis. For that aim, this research applies the TVP-VAR model, and it also computes the optimal weights and hedge ratios for the Defi assets–sector equity portfolios using the DCC-GARCH model. Our main findings reveal that static connectedness is slightly economy- and sector-dependent. Regarding the dynamic connectedness, as expected, the total spillover index changes over time, showing a cruel impact of the global pandemic declaration. Net spillover indices show relevant differences between the Defi assets and certain sectors (net receivers) and sectors such as industrials, materials and information technology (time-varying net transmitters). Finally, the optimal hedge ratios reveal similar levels of coverage in all the periods analyzed, with slight upturns in the cost of such coverage in the crisis period caused by COVID-19.

Keywords: Defi assets; Sector stock markets; Connectedness; COVID-19 pandemic crisis (search for similar items in EconPapers)
JEL-codes: C22 C51 L61 Q02 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:187:y:2023:i:c:s0040162522006953

DOI: 10.1016/j.techfore.2022.122174

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