Blockchain market and eco-friendly financial assets: Dynamic price correlation, connectedness and spillovers with portfolio implications

Emmanuel Abakah, Gm Wali Ullah, Oluwasegun Adekoya (), Christiana Osei Bonsu and Mohammad Abdullah

International Review of Economics & Finance, 2023, vol. 87, issue C, 218-243

Abstract: Since the emergence of blockchain technology, several digital assets such as cryptocurrencies, DeFi, and NFTs have gained considerable attention from investors and policymakers. However, the blockchain market has significant negative ramifications for the environment that may transmit shocks towards eco-friendly financial assets. We use the rolling window wavelet correlation (RWWC) model and the quantile-based time-varying (QVAR) connectedness framework to analyze the dynamic price correlation and connectedness between the blockchain market and green (eco-friendly) financial assets. As a representative of the blockchain market, we use the price returns of four cryptocurrencies, DeFi, and NFTs. For green equities, we use the MSCI Global Environment Price Index and the S&P Green Bond Price Index. We find a low correlation between the blockchain market and green financial assets before the outbreak of COVID-19 and a strong correlation during the COVID-19 and the Russia-Ukraine war. The quantile VAR results show symmetric connectedness of the examined and identical spillovers between extremely positive and strongly negative returns. Green bonds and stocks are the system's major shock receivers. The transmission network results imply major shock transmissions are driven by short-term frequency, whereas there is a lower transmission in the long-term.

Keywords: DeFi; NFTs; Cryptocurrency; Wavelets correlation; Quantile VAR dependence (search for similar items in EconPapers)
JEL-codes: C32 C58 G10 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 (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:87:y:2023:i:c:p:218-243

DOI: 10.1016/j.iref.2023.04.028

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