Co-movement and return spillover: evidence from Bitcoin and traditional assets

Shan Wu ()
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Shan Wu: Nanjing University of Finance and Economics

SN Business & Economics, 2021, vol. 1, issue 10, 1-16

Abstract: Abstract To analyze the asset attribute and hedge effect of Bitcoin, we investigate the relationship between Bitcoin and several kinds of traditional financial assets by the univariate GARCH and multivariate GARCH models. We find that Bitcoin has a unique risk-return characteristic and volatility clustering performance, its high volatility persistence similar to Gold, but different from currency. In addition, Bitcoin exhibits a significant one-way spillover effect with other variables, without a two-way spillover effect. Bitcoin is much more affected by other market shocks than other markets are affected by the impact of Bitcoin shocks, which could not be a haven but a weak hedge. From the dynamic linkage perspective, Bitcoin and Gold have different connectedness to other markets, Gold exhibits a stronger movement to other markets, especially during extreme situations. To summarize, we classify Bitcoin as a high speculative financial asset between Gold and currency, but not Gold or currency. Our study has important implications for investors, policymakers, and risk managers who are interested in Bitcoin.

Keywords: Bitcoin; Linkage; Asset attributes; DCC–GARCH model (search for similar items in EconPapers)
JEL-codes: C10 C58 G1 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s43546-021-00126-w

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