Investigating the Co-Volatility Spillover Effects between Cryptocurrencies and Currencies at Different Natures of Risk Events

【Author】 Hsu, Shu-Han

【Source】JOURNAL OF RISK AND FINANCIAL MANAGEMENT

【影响因子】0.000

【Abstract】This paper examines and confirms the varying volatility of the relationship between cryptocurrency and currency markets at different time periods, such as when the market encountered multiple risk events including the US-China trade war, COVID-19, and the Russian-Ukraine war. We employ the Diagonal BEKK model and find that the co-volatility spillover effects between the returns of cryptocurrencies and currencies, with the exception of Tether and the U.S. dollar index, evolved significantly. Furthermore, the co-volatility spillover effects between cryptocurrencies and EUR have the largest effects and fluctuations. Large-cap cryptocurrencies (Bitcoin and Ethereum) have greater co-volatility spillover effects between them and currencies. Regarding the ability of cryptocurrencies to act as safe-haven for currencies, we observe that Bitcoin, Ethereum, and Tether served as safe-havens during the US-China trade war, and Bitcoin was a safe-haven during COVID-19. During the 2022 Russian-Ukraine war, Bitcoin and Tether were safe-havens. Interestingly, our findings point out that Bitcoin provides a more consistent safe-haven function for currency markets. Overall, by including multiple global risk events and a comprehensive dataset, the results support our conjecture (and earlier studies) indicating that the capabilities of cryptocurrency are time-varying and related to market status and risk events with different natures.

【Keywords】co-volatility spillover effects; cryptocurrency; diagonal BEKK model; exchange rates; global uncertainty

【发表时间】2022 SEP

【收录时间】2022-10-05

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-数字货币