Do stochastic risks flow between industrial and precious metals, Islamic stocks, green bonds, green stocks, clean investments, major foreign exchange rates, and Bitcoin?

Mahdi Ghaemi Asl, Ibrahim D. Raheem and Muhammad Mahdi Rashidi

Resources Policy, 2023, vol. 86, issue PA

Abstract: This study examines the interactions between Bitcoin (BTC) and other major financial markets (forex, equity and bond, and industrial and precious metals). This interaction is viewed from the spectrum of spillover analysis, hedging, and portfolio analyses. Due to the high volatility and volatility clustering nature of most financial series, particularly BTC, we rely on a Multivariate Factor Stochastic Volatility (mvFSV) Model of Kastner et al. (2017). In order to capture the influence of extreme market conditions, we use a quantile-based mvFSV Model. Among other things, results confirm the importance of quantile analysis as results are sensitive to market conditions. For instance, currencies and industrial and precious metals are net transmitters of shocks at lower and middle quantiles, while these assets change their status to the net receiver of shocks at the upper quantile. Results of the total connectedness show that there is a high degree of interconnectedness among the assets, as the total connectedness index ranges between 86% and 100%. Besides, Islamic equities perform such as the most currencies and conventional assets in terms of the transmission of shocks and diversification benefits. The hedging potentials of Bitcoin over other assets were also examined, and results confirm that the hedging effectiveness is commodity-specific. Policy implications of these results are discussed.

Keywords: Bitcoin; Forex; Metals; Equity; Bonds; Stochastic volatility (search for similar items in EconPapers)
JEL-codes: C11 C38 C58 G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:86:y:2023:i:pa:s0301420723008978

DOI: 10.1016/j.resourpol.2023.104186

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