Connectedness across meme assets and sectoral markets: Determinants and portfolio management

Ahmed H. Elsayed, Mohammad Enamul Hoque, Mabruk Billah, Md Kausar Alam

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This study examines the dynamic connectedness and risk spillovers between meme coins, meme stocks, and sectoral markets under different investment horizons. Further, we explore the effects of global uncertainty and risk factors on patterns of dynamic connectedness as well as the benefits of portfolio diversification under different investment strategies. Empirical results indicate that the short-, medium-, and long-term connectedness among these markets are time-varying and are highly responsive to external shocks and stress periods, with the short-term spillover dominating both medium- and long-term spillovers. Furthermore, Meme stocks and coins are net receivers of shock, along with the energy, communication services, utilities, and real estate sectors, whereas other sectors are net transmitters. On the contrary, GameStop-GME becomes net shock transmitters in the medium and long run, while Shiba Inu is a net shock transmitter in the long run. We also show that Meme stocks and Meme coins have distinct features and characteristics from the sectoral markets. They are disconnected and minimally affected by the fluctuations in the sectoral market. Finally, empirical findings show that global risk factors reduce dynamic connectedness across time horizons. These results have several implications for investors, portfolio managers, and policymakers regarding investment strategies, asset allocation, and risk management.

Original languageEnglish
Article number103177
JournalInternational Review of Financial Analysis
Volume93
DOIs
Publication statusPublished - May 2024

Keywords

  • Hedging strategies
  • Meme coins
  • Meme stocks
  • Sectoral market
  • Time-frequency spillover

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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