Bouazizi, T. and Galariotis, E. and Guesmi, K. and Makrychoriti, Panagiota (2023) Investigating the nature of interaction between crypto-currency and commodity markets. International Review of Financial Analysis 88 (102690), ISSN 1057-5219.
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Investigating the Nature of Interaction between CryptoCurrency.pdf - Author's Accepted Manuscript Restricted to Repository staff only until 25 November 2024. Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (1MB) |
Abstract
This paper investigates the dynamic relationship and volatility spillovers between cryptocurrency and commodity markets using different multivariate GARCH models. We take into account the nature of interaction between these markets and their transmission mechanisms when analyzing the conditional cross effects and volatility spillovers. Our results confirm the presence of significant returns and volatility spillovers, and we identify the GO-GARCH (2,2) as the best-fit model for modeling the joint dynamics of various financial assets. Our findings show significant dynamic linkages and volatility spillovers between gold, natural gas, crude oil, Bitcoin, and Ethereum prices. We find that gold can serve as a safe haven in times of economic uncertainty, as it is a good hedge against natural gas and crude oil price fluctuations. We also find evidence of bidirectional causality between crude oil and natural gas prices, suggesting that changes in one commodity's price can affect the other. Furthermore, we observe that Bitcoin and Ethereum are positively correlated with each other, but negatively correlated with gold and crude oil, indicating that these cryptocurrencies may serve as useful diversification tools for investors seeking to reduce their exposure to traditional assets. Our study provides valuable insights for investors and policymakers regarding asset allocation and risk management, and sheds light on the dynamics of financial markets.
Metadata
| Item Type: | Article |
|---|---|
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Research Centres and Institutes: | Accounting and Finance Research Centre |
| Depositing User: | Panagiota Makrychoriti |
| Date Deposited: | 18 Mar 2024 13:57 |
| Last Modified: | 18 Mar 2024 19:22 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/53234 |
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