Extreme risk transmission among bitcoin and crude oil markets

Li, Dongxin; Hong, Yanran; Wang, Lu; Xu, Pengfei; Pan, Zhigang

doi:10.1016/j.resourpol.2022.102761

Cited by 29 publications

(14 citation statements)

References 41 publications

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“…Third, the WTI crude oil market has had no effect on the Bitcoin market during the pandemic. This result is inconsistent with the findings of previous studies ( 20 , 85 , 86 ), and could be attributed to the introduction of GSVI and other markets that have made crude oil unrelated to Bitcoin. Finally, GSVI has a negative effect on Bitcoin returns and a positive effect on Bitcoin volatility.…”

Section: The Parameter Estimation Results Of In-sample Analyses and I...contrasting

confidence: 99%

“…According to the existing literature, Bitcoin returns or volatility are affected by stock markets ( 22 , 55 ), commodity markets ( 20 , 85 , 86 ), and other cryptocurrencies ( 87 ). Specifically, the returns of the stock index like the S&P500 index tends to negatively correlate with Bitcoin returns during the pandemic ( 22 ), and the stock index is also one of the main factors affecting Bitcoin volatility ( 55 ).…”

Section: Methodologies and Datamentioning

confidence: 99%

“…When oil prices rise significantly, Bitcoin falls sharply ( 20 ). And crude oil and Bitcoin appear a bidirectional Granger-causality relationship under extreme shocks ( 85 ). Further, during the pandemic, Bitcoin has been a net receiver of return spillovers from other markets including stock and crude oil, and it has been a net transmitter of volatility spillovers to these markets ( 86 ).…”

Section: Methodologies and Datamentioning

confidence: 99%

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The COVID-19 pandemic and Bitcoin: Perspective from investor attention

Wan

Zhu

2023

Front. Public Health

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The response of the Bitcoin market to the novel coronavirus (COVID-19) pandemic is an example of how a global public health crisis can cause drastic market adjustments or even a market crash. Investor attention on the COVID-19 pandemic is likely to play an important role in this response. Focusing on the Bitcoin futures market, this paper aims to investigate whether pandemic attention can explain and forecast the returns and volatility of Bitcoin futures. Using the daily Google search volume index for the “coronavirus” keyword from January 2020 to February 2022 to represent pandemic attention, this paper implements the Granger causality test, Vector Autoregression (VAR) analysis, and several linear effects analyses. The findings suggest that pandemic attention is a granger cause of Bitcoin returns and volatility. It appears that an increase in pandemic attention results in lower returns and excessive volatility in the Bitcoin futures market, even after taking into account the interactive effects and the influence of controlling other financial markets. In addition, this paper carries out the out-of-sample forecasts and finds that the predictive models with pandemic attention do improve the out-of-sample forecast performance, which is enhanced in the prediction of Bitcoin returns while diminished in the prediction of Bitcoin volatility as the forecast horizon is extended. Finally, the predictive models including pandemic attention can generate significant economic benefits by constructing portfolios among Bitcoin futures and risk-free assets. All the results demonstrate that pandemic attention plays an important and non-negligible role in the Bitcoin futures market. This paper can provide enlightens for subsequent research on Bitcoin based on investor attention sparked by public emergencies.

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Section: The Parameter Estimation Results Of In-sample Analyses and I...contrasting

confidence: 99%

Section: Methodologies and Datamentioning

confidence: 99%

Section: Methodologies and Datamentioning

confidence: 99%

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The COVID-19 pandemic and Bitcoin: Perspective from investor attention

Wan

Zhu

2023

Front. Public Health

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“…The authors suggest that policymakers should introduce environmental taxes imposed on cryptocurrency transactions to dampen the damaging effects of cryptocurrencies on the environment. By applying asymmetric causality tests, Li et al (2022) obtain empirical evidence that supports the dynamic interaction and risk transmission between the oil market and Bitcoin. In Naeem et al (2021), the authors make use of asymmetric methods and hourly data to test for the efficient market hypothesis of four major cryptocurrencies.…”

Section: Literature Reviewmentioning

confidence: 99%

On a regime switching illiquid high volatile prediction model for cryptocurrencies

El-Khatib

Hatemi‐J

2023

JES

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PurposeThe current paper proposes a prediction model for a cryptocurrency that encompasses three properties observed in the markets for cryptocurrencies—namely high volatility, illiquidity, and regime shifts. As far as the authors’ knowledge extends, this paper is the first attempt to introduce a stochastic differential equation (SDE) for pricing cryptocurrencies while explicitly integrating the mentioned three significant stylized facts.Design/methodology/approachCryptocurrencies are increasingly utilized by investors and financial institutions worldwide as an alternative means of exchange. To the authors’ best knowledge, there is no SDE in the literature that can be used for representing and evaluating the data-generating process for the price of a cryptocurrency.FindingsBy using Ito calculus, the authors provide a solution for the suggested SDE along with mathematical proof. Numerical simulations are performed and compared to the real data, which seems to capture the dynamics of the price path of two main cryptocurrencies in the real markets.Originality/valueThe stochastic differential model that is introduced and solved in this article is expected to be useful for the pricing of cryptocurrencies in situations of high volatility combined with structural changes and illiquidity. These attributes are apparent in the real markets for cryptocurrencies; therefore, accounting explicitly for these underlying characteristics is a necessary condition for accurate evaluation of cryptocurrencies.

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“…They proposed Copula model during 10 years to conclude that to Chinese inves-tors, gold is a superior portfolio diversifier than BTC. Li et al (2022) Used the Granger causality test to investigate the extreme risk transmission between BTC and the crude oil market. They validated the presence of severe asymmetry in the oil-Bitcoin correlation and that the asymmetry is related to the magnitude of both price changes.…”

Section: Literature Reviewmentioning

confidence: 99%

On the Linkage between Bitcoin, Islamic Stocks, and Oil Prices

ALJASEM¹

2022

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The expansion of asset classes and the health, economic and geopolitical crises have made it necessary for investors to diversify their assets in international markets. This book aims to investigate the causal relationship between Bitcoin (BTC), Islamic Stock Markets (ISMs), and Oil. To this end, Firstly, the stationarity of the data series was checked using the Augmented Dickey-Fuller (ADF) and Philips Perron (PP) Tests for the period from August 18, 2011, to December 10, 2021. Then, after implementing the Vector Autoregressive (VAR) Model and various robustness checks to trace the existence of correlations between the variables, the Nonparametric Causality-in- Quantiles Test was utilized to determine the direction and strength of the relationship between the studied series. The results suggested that there are two-way causality-in- variance among variables. The strength of this causality especially rises in the normal market conditions but is weak in the upper quantiles except from BTC to DJI and from WTI to DJI. In terms of causality-in-mean, there is one-way causality from DJI to WTI in only a medium quantile.

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Extreme risk transmission among bitcoin and crude oil markets

Cited by 29 publications

References 41 publications

The COVID-19 pandemic and Bitcoin: Perspective from investor attention

The COVID-19 pandemic and Bitcoin: Perspective from investor attention

On a regime switching illiquid high volatile prediction model for cryptocurrencies

On the Linkage between Bitcoin, Islamic Stocks, and Oil Prices

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