Do financial volatilities mitigate the risk of cryptocurrency indexes?

Muhammad Abubakr Naeem, Brian Lucey, Sitara Karim and Abdul Ghafoor

Finance Research Letters, 2022, vol. 50, issue C

Abstract: Cryptocurrencies are renowned for their extreme volatilities, while financial volatilities exhibit inherent uncertainty in stock, oil, gold, and currency markets. Given these concerns, the current study endeavors to answer the question of whether financial volatilities can mitigate the risk of cryptocurrency indexes. We employ the time-varying parameters vector autoregression approach and find distinct spillover patterns between financial volatilities and cryptocurrency indexes. In this way, we stress the diversification benefits of financial volatilities to mitigate the risk of cryptocurrency indexes. Time-varying trends demonstrated extreme risk spillovers during turmoil periods. We outlined useful implications for policymakers, financial market participants, investors, and portfolio managers.

Keywords: Cryptocurrency Indexes; Financial Volatilities; Risk Mitigation; TVP-VAR (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004111

DOI: 10.1016/j.frl.2022.103206

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