COVID-19 and the volatility interlinkage between bitcoin and financial assets

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    18 Citations (Scopus)

    Abstract

    We investigate the effects of COVID-19 on volatility connectedness between bitcoin and five traditional financial assets from the gold, oil, foreign exchange, stock, and bond markets, employing high-frequency data. The empirical analyses are carried out using the wavelet coherence approach and dynamic frequency-domain connectedness method. Our results generally indicate that the volatility dynamics between bitcoin and the financial assets are weak or negative before the pandemic while they become positive during the pandemic times for most of the assets. Further, the volatility connectedness for bitcoin-gold and bitcoin-foreign exchange pairs is most significant in the short term, while it is significant in the intermediate term for bitcoin-oil and bitcoin-equity pairs during the pandemic. We examine optimal portfolios to hedge Bitcoin shocks at multiple investment horizons during the pandemic. We find that most of these financial assets perform as a good hedger against Bitcoin shocks in the short and long term but not in the medium term.

    Original languageEnglish
    Pages (from-to)2875-2901
    Number of pages27
    JournalEmpirical Economics
    Volume63
    Issue number6
    DOIs
    Publication statusPublished - Dec 2022

    Keywords

    • Bitcoin
    • COVID-19
    • Dynamic Frequency-domain connectedness
    • Volatility interdependence
    • Wavelet coherence

    ASJC Scopus subject areas

    • Statistics and Probability
    • Mathematics (miscellaneous)
    • Social Sciences (miscellaneous)
    • Economics and Econometrics

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