ESG leaders and crypto currency market: Asymmetric TVP-VAR connectedness and investment approaches

Rashida Bibi, Saqib Gulzar and Syed Jawad Hussain Shahzad

Research in International Business and Finance, 2025, vol. 76, issue C

Abstract: This study investigates return spillovers between a global Environmental, Social, and Governance (ESG) leaders index and cryptocurrencies. We employ daily data over the sample period 11 November 2017–30 December 2023 and use asymmetric dynamic connectedness via the time-varying vector autoregression (TVP-VAR) model to examine positive and negative connectedness. We also use dynamic portfolio exercise through common hedging approaches namely minimum variance, minimum correlation, and minimum connectedness portfolio to evaluate the performance of resulting portfolios. Results demonstrate that negative connectedness dominates throughout the sample period. This finding implies that risk-averse investors and profit-maximizing agents are more influenced by negative news. The results are robust to different methodological choices i.e., lag order based on different information criteria and forecast horizons. Further, the minimum correlation and minimum connectedness portfolio approaches depict the asymmetry well and provide a deeper awareness about portfolio management.

Keywords: TVP-VAR; Asymmetric dynamic connectedness; ESG leaders index; Cryptocurrencies; Portfolio management (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:76:y:2025:i:c:s0275531925000893

DOI: 10.1016/j.ribaf.2025.102833

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