Risk spillover and hedging effects between stock markets and cryptocurrency markets depending upon network analysis

Long Guo and Li-Xin Zhong

The North American Journal of Economics and Finance, 2025, vol. 80, issue C

Abstract: How to refrain from being affected by external shocks is a fascinating but intriguing problem in financial markets. Depending upon multilayer network analysis, we investigate the risk spillover between stock markets and cryptocurrency markets. Additionally, by constructing portfolios including green and dirty cryptocurrencies, we examine whether the existence of cryptocurrency markets helps stabilize the asset prices in the whole world. The results indicate that the effects of risk spillovers between cryptocurrency markets and stock markets exhibit regional differences, including risk spillover direction and risk spillover intensity. By comparing the price stability of different portforlios, we find that the portforlios with green and dirty cryptocurrencies exhibit greater hedge effectiveness than the portforlios without cryptocurrencies, which confirms the positive role of cryptocurrency markets in stabilizing the global asset markets.

Keywords: Hedging effect; Risk spillover; Multilayer network; Green and dirty cryptocurrencies (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001640

DOI: 10.1016/j.najef.2025.102524

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