A time-frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets

【Author】 Umar, Zaghum; Gubareva, Mariya

【Source】JOURNAL OF BEHAVIORAL AND EXPERIMENTAL FINANCE

【影响因子】8.222

【Abstract】We apply wavelet analyses to examine the impact of the Covid-19 fueled panic on the volatility of major fiat and cryptocurrency markets during January-May, 2020. There is high coherence between moves of the Coronavirus Panic Index and the price moves in Euro, British pound, and Renminbi currencies as well as movements of the Bloomberg Galaxy Crypto Index. The main conclusions for each index pair are quite similar and corroborate with our thesis that the cross-currency hedge strategies, which could work under normal market conditions, are likely to fail during the periods of global crisis, e.g., such as the Covid-19 pandemic. However, we document some important differences in currency markets behavior, which potentially could be used to design effective cross-currency hedges capable of withstanding adverse impacts of global financial and economic turmoil. Our findings could be of use for future development of financial policies and currency markets regulation rules. (C) 2020 Elsevier B.V. All rights reserved.

【Keywords】Covid-19 panic; Wavelet coherence; Wavelet phase difference; Cross-currency hedge strategies; Cryptocurrencies; Currency markets; Lead-lag effects; Causality

【发表时间】2020 DEC

【收录时间】2022-01-02

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