Do cryptocurrencies provide better hedging? Evidence from major equity markets during COVID-19 pandemic

【Author】 Maitra, Debasish; Rehman, Mobeen Ur; Dash, Saumya Ranjan; Kang, Sang Hoon

【Source】NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE

【影响因子】3.136

【Abstract】Using the five-minute interval price data of two cryptocurrencies and eight stock market indices, we examine the risk spillover and hedging effectiveness between these two assets. Our approach provides a comparative assessment encompassing the pre-COVID-19 and COVID-19 sample periods. We employ copula models to assess the dependence and risk spillover from Bitcoin and Ethereum to stock market returns during both the pre-COVID-19 and COVID-19 periods. Notably, the COVID-19 pandemic has increased the risk spillover from Bitcoin and Ethereum to stock market returns. The findings vis-a-vis portfolio weights and hedge effectiveness highlight hedging gains; however, optimal investments in Bitcoin and Ethereum have reduced during the COVID-19 pandemic, while the cost of hedging has increased during this period. The findings also confirm that cryptocurrencies cannot provide incremental gains by hedging stock market risk during the COVID-19 pandemic.

【Keywords】Cryptocurrency; Stock market; Risk spillover; Portfolio diversification; COVID-19

【发表时间】2022 NOV

【收录时间】2022-10-13

【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