Economics at your fingertips  

Investigating the dynamic relationship between cryptocurrencies and conventional assets: Implications for financial investors

Lanouar Charfeddine (), Noureddine Benlagha () and Youcef Maouchi

Economic Modelling, 2020, vol. 85, issue C, 198-217

Abstract: Cryptocurrencies are gradually establishing themselves as a new class of assets with unique features, although there remains skepticism and a lack of understanding of their nature. In this study, we compare the financial properties of these new digital assets and investigate their dynamic relationship with major financial securities and commodities. Furthermore, we evaluate the economic and financial potential benefits of cryptocurrencies for financial investors. Using different time-varying copula approaches and bivariate dynamic conditional correlation GARCH models, we find that the cross-correlation with conventional assets is changing over time but weak, supporting the idea that these cryptocurrencies can be suitable for financial diversification. However, our analysis of portfolios shows that cryptocurrencies are poor hedging instruments in most of the considered cases. Moreover, we find that the relationship between cryptocurrencies and conventional assets is sensitive to external economic and financial shocks.

Keywords: Bitcoin; Ethereum; Cryptocurrencies; Dynamic relationship; Diversification benefits; Hedging (search for similar items in EconPapers)
JEL-codes: C22 G01 G11 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.econmod.2019.05.016

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-01-01
Handle: RePEc:eee:ecmode:v:85:y:2020:i:c:p:198-217