Asymmetric and Time-Varying Connectedness of FinTech with Equities, Bonds, and Cryptocurrencies: A Quantile-on-Quantile Perspective

Mohammad Sharif Karimi, Omar Esqueda () and Naveen Mahasen Weerasinghe
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Mohammad Sharif Karimi: College of Business, Tarleton State University, 1333 W. Washington St., Stephenville, TX 76401, USA
Omar Esqueda: College of Business, Tarleton State University, 1333 W. Washington St., Stephenville, TX 76401, USA
Naveen Mahasen Weerasinghe: Verité Research, 165/1 Park Road, Colombo 00500, Sri Lanka

Risks, 2025, vol. 13, issue 12, 1-27

Abstract: This study employs a quantile-on-quantile connectedness approach to analyze the asymmetric, distribution-dependent, and time-varying spillovers between FinTech indices and traditional financial markets. The results show that spillovers are concentrated in the distribution tails, with FinTech indices exhibiting strong co-movements with equities and Bitcoin under extreme conditions, while linkages with U.S. Treasury bonds are weaker and often inverse. Net connectedness analysis reveals that the S&P 500 and Bitcoin act as the primary transmitters of shocks into FinTech indices, whereas Treasuries generally serve as receivers, except during stress episodes when safe-haven flows or heightened credit risk reverse the direction of spillovers. The dynamic ∆TCI (Difference between the total direct connectedness and the reverse total connectedness) further demonstrates that FinTech indices serve as net transmitters in stable markets but become receivers during crises such as the COVID-19 pandemic, the Federal Reserve’s tightening cycle of 2022–2023, and the FTX-driven crypto collapse. Segmental heterogeneity is also evident: distributed ledger firms are highly sensitive to cryptocurrency dynamics, alternative finance providers respond strongly to both equity and bond markets, and digital payments firms are primarily influenced by equity spillovers. Overall, the findings underscore FinTech’s dual role—transmitting shocks during tranquil periods but amplifying systemic vulnerabilities during crises. For investors, diversification benefits are state-dependent and largely disappear under adverse conditions. For regulators and policymakers, the results highlight the systemic importance of FinTech–equity and crypto–ledger linkages and the need to integrate FinTech exposures into macroprudential surveillance to contain volatility spillovers and safeguard financial stability.

Keywords: Bitcoin; fintech returns; stock market; credit risk; quantile regression (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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