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Information dominance among hedging assets: Evidence from return and volatility directional spillovers in time and frequency domains

Sheng Zeng, Xinchun Liu, Xiafei Li, Qi Wei and Yue Shang

Physica A: Statistical Mechanics and its Applications, 2019, vol. 536, issue C

Abstract: In this paper, we aim to compare the information/price discovery abilities of four commonly used hedging assets, i.e. Bitcoin, crude oil, gold and USD, by investigating the return and volatility spillover effects in both time and frequency domains. Various static and dynamic connectedness measures developed by Diebold and Yilmaz [28] and Barunik and Krehlik [29] are utilized. Our empirical results show that firstly the return spillovers within the four hedging assets are mainly observed in short-term horizon, however, the volatility spillovers are primarily found in long-term horizon. Secondly, USD acts as the major information transmitter in return spillovers in both time and frequency domains of short to long-term time horizons. Thirdly, crude oil dominates other assets by contributing the largest net positive volatility spillovers, especially in long-term horizon. Finally, the results in dynamic return and volatility spillovers further confirm the robustness of the main findings.

Keywords: Information discovery; Spillover; Hedging assets; Bitcoin; Frequency analysis (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.physa.2019.122565

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