 Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approachSusovon Jana and Tarak N. Sahu Economic Notes, 2023, vol. 52, issue 3 Abstract: This study analyses six major cryptocurrencies and four global stock markets to explore the role of cryptocurrencies as a hedge, safe haven, and diversifier in stock markets. The study employs ADCC‐GARCH and Wavelet Coherence Technique, using daily data from 4 January 2017 to 28 February 2023. The study has found that stock returns and unstable cryptocurrency returns have high volatility persistence in the long run. Besides, while unstable digital currencies (Bitcoin, Ethereum, Binance Coin, and Dogecoin) serve as a hedge during stable economic periods, they have not been a hedge during economic turmoil in the stock markets. Conversely, stablecoins (Tether and USD Coin) have been shown to have acted as a hedge during normal economic times and have offered a safe haven during economic downturns. Except for Tether, all cryptocurrencies' diversification capacity is time‐varying. In stable economic conditions, they serve as diversifiers, but during turmoil, they do not. However, Tether serves as a diversifier regardless of the financial situation. Finally, the present investigation is expected to offer crucial information on hedge, safe haven and diversification for quasi‐investors. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:ecnote:v:52:y:2023:i:3:n:e12227 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Economic Notes from Banca Monte dei Paschi di Siena SpA |
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