Do financial volatilities mitigate the risk of cryptocurrency indexes?

Muhammad Abubakr Naeem, Brian M. Lucey, Sitara Karim, Abdul Ghafoor

Research output: Contribution to journalArticlepeer-review

17 Citations (Scopus)

Abstract

Cryptocurrencies are renowned for their extreme volatilities, while financial volatilities exhibit inherent uncertainty in stock, oil, gold, and currency markets. Given these concerns, the current study endeavors to answer the question of whether financial volatilities can mitigate the risk of cryptocurrency indexes. We employ the time-varying parameters vector autoregression approach and find distinct spillover patterns between financial volatilities and cryptocurrency indexes. In this way, we stress the diversification benefits of financial volatilities to mitigate the risk of cryptocurrency indexes. Time-varying trends demonstrated extreme risk spillovers during turmoil periods. We outlined useful implications for policymakers, financial market participants, investors, and portfolio managers.

Original languageEnglish
Article number103206
JournalFinance Research Letters
Volume50
DOIs
Publication statusPublished - Dec 2022

Keywords

  • Cryptocurrency Indexes
  • Financial Volatilities
  • Risk Mitigation
  • TVP-VAR

ASJC Scopus subject areas

  • Finance

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