Investigating the relationship between volatilities of cryptocurrencies and other financial assets

Achraf Ghorbel () and Ahmed Jeribi
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Achraf Ghorbel: University of Sfax
Ahmed Jeribi: University of Sfax

Decisions in Economics and Finance, 2021, vol. 44, issue 2, No 15, 817-843

Abstract: Abstract This paper analyzes the relationships between volatilities of five cryptocurrencies, American indices (S&P500, Nasdaq, and VIX), oil, and gold. The results of the BEKK-GARCH model show evidence of a higher volatility spillover between cryptocurrencies and lower volatility spillover between cryptocurrencies and financial assets. The results of the DCC-GARCH model identify an important effect of the launch of Bitcoin futures. During the stability period, the overarching implications of the results are that there is a persistence of correlation between cryptocurrencies in high positive value and low dynamic conditional correlations between cryptocurrencies and financial assets. Also, we find that Bitcoin and gold are considered hedges for the US investors before the coronavirus crisis. Our results show that cryptocurrencies may offer diversification benefits for investors and are diversifiers during the stability period. At the beginning of 2020, we observe that the conditional correlation increased between cryptocurrencies, stock indexes, and oil which confirm the effect of the coronavirus contagion between them. Unlike gold, digital assets are not a safe haven for US investors during the coronavirus crisis.

Keywords: Cryptocurrencies; Bitcoin; Gold; Oil price; VIX; Stock market; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: F3 G0 G1 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (23)

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DOI: 10.1007/s10203-020-00312-9

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