The impact of digital finance on the natural resource market: Evidence from DeFi, oil, and gold

Çevik, Emrah İsmail; Günay, Samet; Zafar, Muhammad Wasif; Destek, Mehmet Akif; Buğan, Mehmet Fatih; Tuna, Fatih

doi:10.1016/j.resourpol.2022.103081

Cited by 25 publications

(16 citation statements)

References 69 publications

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“…This implies that the diversification benefits of DeFi for currency markets will be more prominent in the medium and long term. Several other papers, such as , Corbet et al (2023) and Cevik et al (2022), have concluded that there is a similar lessened nexus between DeFi and other financial markets in the long term.…”

Section: Discussionmentioning

confidence: 87%

“…Modeling the time-varying connectedness of DeFi and other assets is a significant and new subject to look into due to recent developments in the rise of integration between equity markets. Different articles use a wide range of methodologies and report that DeFi and nonfungible tokens are very weakly connected to traditional assets, namely, GCC and BRICS stocks (Bejaoui et al , 2023), oil, gold, Bitcoin, the S&P 500 (Yousaf and Yarovaya, 2022; Piñeiro-Chousa et al , 2022; Yousaf et al , 2023a), natural resource markets (Cevik et al , 2022) and cryptocurrency markets (Karim et al , 2022; Corbet et al , 2023).…”

Section: Related Literaturementioning

confidence: 99%

“…In addition, foreign exchange derivatives known as currency forwards are used to manage and hedge future exposure to a currency pair (Almaskati, 2022). We use daily Chainlink prices for the DeFi market (Cevik et al , 2022; Yousaf et al , 2022). The analysis spans the years from March 10, 2019, to June 11, 2023.…”

Section: Datamentioning

confidence: 99%

“…Despite the necessity to understand the price dynamics of conventional assets for policy formation and trade, studies on DeFi assets are fairly few (Ghosh et al, 2023). Research has been implemented to gauge the relationship of DeFi with the prices of traditional financial markets (Bejaoui et al, 2023;Yousaf and Yarovaya, 2022;Piñeiro-Chousa et al, 2022;Yousaf et al, 2023aYousaf et al, , 2023bCevik et al, 2022;Karim et al, 2022;Corbet et al, 2023). Nevertheless, despite the fact that GCC foreign currency forward markets are the most traded hedging and liquidity management products in the region (Almaskati, 2022), we are not aware of any research that investigates the link between these markets and DeFi.…”

Section: Introductionmentioning

confidence: 99%

“…A portfolio manager must understand the scope and nature of interactions among the assets that make up the portfolio. The degree of their interconnection, however, may differ between asset classes or markets (Cevik et al , 2022). If DeFi assets have unique drivers in their price developments, it would assert that their existence might provide diversification reasons.…”

Section: Introductionmentioning

confidence: 99%

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An empirical analysis of the dynamic impact of DeFi on GCC foreign exchange forward markets: portfolio implication

Tien,

Dang,

Hung

2023

IMEFM

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Purpose This paper aims to investigate the conditional equicorrelation and cross-quantile dependence between the DeFi, European and GCC currency markets (Oman, Qatar, Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates). Design/methodology/approach This study applies the GARCH-DECO model and cross-quantilogram framework. Findings The findings reveal evidence of weak and negative average equicorrelations between the examined markets through time, excluding the COVID-19 outbreak and Russia–Ukraine conflict, which is consistent with the literature examining relationships in different markets. From the cross-quantilogram model, the authors note that the dependence between DeFi, EURO and GCC foreign exchange rate markets is greatest in the short run and diminishes over the medium- and long-term horizons, indicating rapid information processing between the markets under consideration, as most innovations are transmitted in the short term. Practical implications For the pairs of DeFi and currency markets, the static and dynamic optimal weights and hedging ratios are also estimated, providing new empirical data for portfolio managers and investors. Originality/value To the best of the authors’ knowledge, this is one of the most important research looking into the conditional correlation and predictability between the DeFi, EURO and GCC foreign exchange markets. More importantly, this study provides the first empirical proof of the safe-haven, hedging and diversification qualities of DeFi, EURO and GCC currencies, and this work also covers the COVID-19 pandemic and the Russia–Ukraine war with the use of a single dynamic measure produced by the GARCH-DECO model. In addition, the directional predictability between variables under consideration using the cross-quantilogram model is examined, which can be capable of capturing the asymmetry in the quantile dependent structure. The findings are helpful for both policymakers and investors in improving their trading selections and strategies for risk management in different market conditions.

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Section: Discussionmentioning

confidence: 87%