Co-movement and return spillover: evidence from Bitcoin and traditional assets

Abstract

To analyze the asset attribute and hedge effect of Bitcoin, we investigate the relationship between Bitcoin and several kinds of traditional financial assets by the univariate GARCH and multivariate GARCH models. We find that Bitcoin has a unique risk-return characteristic and volatility clustering performance, its high volatility persistence similar to Gold, but different from currency. In addition, Bitcoin exhibits a significant one-way spillover effect with other variables, without a two-way spillover effect. Bitcoin is much more affected by other market shocks than other markets are affected by the impact of Bitcoin shocks, which could not be a haven but a weak hedge. From the dynamic linkage perspective, Bitcoin and Gold have different connectedness to other markets, Gold exhibits a stronger movement to other markets, especially during extreme situations. To summarize, we classify Bitcoin as a high speculative financial asset between Gold and currency, but not Gold or currency. Our study has important implications for investors, policymakers, and risk managers who are interested in Bitcoin.

High frequency volatility spillover between oil and non-energy commodities during crisis and tranquil periods

“…The normality diagnostics reveal some interesting facts about our data. First, the Jarque–Bera (JB) test for normality revealed high values that were all significant at the 0.05 level, thus rejecting the null hypothesis of normality (Wu 2021 ). Skewness and kurtosis values for all the commodities also present evidence to support the non-normality of the data since they are all non-zero (Marobhe and Kansheba 2022 ).…”

Exploring Dependence Relationships between Bitcoin and Commodity Returns: An Assessment Using the Gerber Cross-Correlation

“…The author shows that Bitcoin and stock market returns are positively correlated during financial market downturns, in sharp contrast to the behaviour of gold returns, which is widely believed to be a hedging instrument against stock market downfalls. These findings are challenged by (i) [6,7], who show that gold is very sensitive to uncertainty shock from cryptocurrency markets, and by (ii) [7], who employs a timevarying parameter vector autoregressive model to show that gold is vulnerable to return and volatility spillovers from cryptocurrency uncertainty measures. The difference in behaviour between Bitcoin and commodities returns is carried out also for higher-order moments.…”