Dynamic Connectedness and Portfolio Diversification during the Coronavirus Disease 2019 Pandemic: Evidence from the Cryptocurrency Market

Samia Nasreen, Aviral Tiwari and Seong-Min Yoon
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Samia Nasreen: Department of Economics, Lahore College for Women University, Lahore 35200, Pakistan

Sustainability, 2021, vol. 13, issue 14, 1-14

Abstract: This paper examines interlinkages and hedging opportunities between nine major cryptocurrencies from 30 September 2015 to 4 June 2020, a period which notably includes the COVID-19 outbreak lasting from early 2020 to the end of the sample period. Estimated time-varying correlation coefficients that are based on a TVP-VAR show a high degree of interconnectedness among cryptocurrencies throughout the sample period. Notably, the correlations reach their joint minimum during the COVID-19 pandemic indicating that cryptocurrencies acted as a hedge or safe haven during the stressful period of the COVID-19 pandemic. The cryptocurrency weights of the minimum connectedness portfolio were significantly reduced and their hedging effectiveness varied greatly during the pandemic, implying that investors’ preferences changed during the COVID-19 period.

Keywords: cryptocurrency; COVID-19; TVP-VAR; minimum connectedness portfolio; hedging effectiveness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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