Are cryptocurrencies connected to gold? A wavelet‐based quantile‐in‐quantile approach

Seyram Pearl Kumah and Jones Odei-Mensah ()

International Journal of Finance & Economics, 2022, vol. 27, issue 3, 3640-3659

Abstract: Accurate measurement of relationship between assets is sensitive to different market conditions in different horizons and has implications for portfolio optimization. Cryptocurrencies are new category of assets that can reduce the risk of well‐diversified portfolio including gold. The paper explores the connections between seven cryptocurrencies and gold at bear (bull) markets across time to uncover the hedging properties of cryptocurrencies for gold investors. Wavelet technique was used to decompose the daily return series of the assets into short‐, medium‐ and long‐term frequencies. Quantile regression (QR) and quantile‐in‐quantile regression (QQR) were applied on the decomposed series to establish the association between the assets over 19 quantiles (τ = 0.05 to 0.95). QR results show all cryptocurrencies as hedges for gold regardless of market regime in the medium to long‐terms. QQR results depict inverse association at bear market but positive association at bull market across time suggesting hedging possibilities at bear markets. Our study provides precise information to investors, regulators and policy makers on risk mitigating strategies for extreme gold market fluctuations across time and market states.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1002/ijfe.2342

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:27:y:2022:i:3:p:3640-3659

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().