Exploring Dependence Relationships between Bitcoin and Commodity Returns: An Assessment Using the Gerber Cross-Correlation

Kokulo K. Lawuobahsumo, Bernardina Algieri, Leonardo Iania and Arturo Leccadito ()
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Kokulo K. Lawuobahsumo: Department of Economics, Statistics and Finance, University of Calabria, Ponte Bucci, 87030 Rende, Italy
Bernardina Algieri: Department of Economics, Statistics and Finance, University of Calabria, Ponte Bucci, 87030 Rende, Italy
Arturo Leccadito: Department of Economics, Statistics and Finance, University of Calabria, Ponte Bucci, 87030 Rende, Italy

Commodities, 2022, vol. 1, issue 1, 1-16

Abstract: We use a robust measure of non-linear dependence, the Gerber cross-correlation statistic, to study the cross-dependence between the returns on Bitcoin and a set of commodities, namely wheat, gold, platinum and crude oil WTI. The Gerber statistic enables us to obtain a more robust co-movement measure since it is neither affected by extremely large nor small movements that characterise financial time series; thus, it strips out noise from the data and allows us to capture effective co-movements between series when the movements are “substantial”. Focusing on the period 2014–2022, we construct the bootstrapped confidence intervals for the Gerber statistic and test the null that all the Gerber cross-correlations up to lag k max are zero. Our results indicate a low degree of dependence between Bitcoin and commodities prices, both when we consider contemporaneous correlation and when we employ correlations between current Bitcoin and lagged (one day, one week, or one month) commodities returns. Further, the cross-correlation between Bitcoin and commodities’ returns, although scanty, shows an increasing trend during periods of economic, health and financial turbulence. This increased cross-correlation of returns during hectic market periods could be due to the contagion effect of some markets by others, which could also explain the strong dependence across volatilities we detected. Based on our results, Bitcoin cannot be considered the “new digital gold”.

Keywords: Gerber correlation; cross-correlation; comovements; Bitcoin (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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