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Crude oil price and cryptocurrencies: Evidence of volatility connectedness and hedging strategy

David Okorie () and Boqiang Lin ()

Energy Economics, 2020, vol. 87, issue C

Abstract: This paper examines the volatility connectedness between crud oil spot prices and cryptocurrencies. Given that cryptocurrency markets are perceived as commodity markets, there exist some levels of effects from and to other markets like the crude oil (petroleum) market. Using the VAR − MGARCH − GJR − BEKK techniques and the Wald tests, we found evidence of bidirectional volatility spillover between the crude oil market and Bit Capital Vendor as well as a unidirectional volatility spillover effect from crude oil market to Bitcoin Cash market and finally, Ethereum, XRP, and ReddCoin cryptocurrency markets have a significant unidirectional volatility spillover to the crude oil markets. In addition, while the hedging potentials of crude oil assets on Ethereum cryptocurrency may be short-lived, the crude oil asset hedging potentials for Solve, Elastos and Bit Capital Vendor are rather long-lived into the future.

Keywords: Volatility; Spillover effects; Cryptocurrencies; Wald tests, hypothesis testing (search for similar items in EconPapers)
JEL-codes: C01 C12 C52 G10 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2020.104703

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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