Which one is more informative in determining price movements of hedging assets? Evidence from Bitcoin, gold and crude oil markets

Jingyu Jin, Jiang Yu, Yang Hu and Yue Shang

Physica A: Statistical Mechanics and its Applications, 2019, vol. 527, issue C

Abstract: In this paper, we aim to identify which one is more informative in determining the price fluctuations in a system consisting of three commonly used hedging assets, i.e. Bitcoin, gold and crude oil. Multifractal detrended cross-correlation analysis (MF-DCCA), multivariate GARCH (MVGARCH) and information share (IS) analysis are utilized to achieve this purpose. The empirical results show that, firstly the MF-DCCA suggests that obvious multifractality exists in the cross-correlations among the three hedging assets and Bitcoin is more susceptible to price fluctuations from gold and crude oil markets. Secondly the results from DCC-MVGARCH model indicate that, although significant volatility spillovers are detected among the three assets, the spillover effects from gold and crude oil markets to Bitcoin market are much stronger than other spillovers. Additionally, the dynamic correlations between gold and crude oil markets are almost positive, while those between Bitcoin and gold, and those between Bitcoin and oil markets are nearly negative during the whole sample periods. Finally, the information share analysis further confirms that gold market dominates crude oil and Bitcoin markets in absorbing new information and contributes more explanatory power in price movements/variance of the hedging assets system.

Keywords: Econophysics; MF-DCCA; Information share; Hedging assets; Bitcoin (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (49)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:527:y:2019:i:c:s0378437119306776

DOI: 10.1016/j.physa.2019.121121

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