Wavelet quantile correlation between DeFi assets and banking stocks

Emmanuel Joel Aikins Abakah, John W. Goodell, Zunaidah Sulong and Mohammad Abdullah

Finance Research Letters, 2024, vol. 70, issue C

Abstract: We examine time frequency quantile correlation and portfolio benefits between decentralized finance (DeFi) assets and G7 banking stocks. We employ wavelet quantile correlation to examine the correlation between DeFi and bank stocks. Notably, results reveal diversification benefits in the short to medium term and highlight DeFi assets' hedging and safe-haven properties, particularly against Japanese banking stocks. Further, bivariate portfolio analysis provides optimal allocation strategies. Our research offers new guidance for investors, portfolio managers, and regulators regarding the intersection of DeFi and traditional banking stocks.

Keywords: DeFi; Bank stocks; Wavelet analysis; Quantile correlation; Portfolio diversification (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013011

DOI: 10.1016/j.frl.2024.106272

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