Liquidity connectedness in cryptocurrency market

Quantile frequency connectedness between energy tokens, crypto market, and renewable energy stock markets

Utilizing a quantile frequency connectedness approach, we explore the connectedness between energy tokens, crypto market, and renewable energy stock markets. The empirical results show that the connectedness measures of the series are characterized by asymmetry and heterogeneity across quantiles and different investment horizons. Specifically, the characteristic of clustering has been observed that energy tokens and crypto market are more interconnected, while the renewable energy stock markets are more interconnected with each other at median quantile. The linkages between energy tokens and renewable energy stock markets are quite weak under normal market conditions, suggesting the diversification opportunities in investing these financial assets. However, these series are more interconnected under extreme market conditions, with the renewable energy stock markets are on the dominating end of the propagation mechanism while the energy tokens and crypto market are net receivers of shocks. Further frequency decomposition shows that this strategy can hold in the short term, while in the long term investors could benefit from the diversification opportunities by investing both kinds of financial assets. Additionally, the dynamic analysis affirms that the connectedness measures are varied and event-dependent over time. Our results may help investors and policymakers have a better assessment and portfolio management.

Interconnectedness dynamic spillover among US, Russian, and Ukrainian equity indices during the COVID-19 pandemic and the Russian-Ukrainian war

We examine the dynamics and spillover effects of interconnectedness among equity indices during the COVID-19 pandemic and the Russian-Ukrainian war. Using daily data from June 2010 to May 2023, we consider five major equity indices, namely, the Dow Jones Industrial Average (DJIA), National Association of Securities Dealers Automated Quotations (Nasdaq), Standard and Poor's 500 (S&P 500), PFTS (Ukraine), and Moscow Exchange (MOEX; Russia). The results demonstrate a 45 % level of the total connectedness index to explain the interconnectedness among these indices. The findings indicate that the DJIA, Nasdaq, Small Cap 100, and MOEX are net receivers of spillovers, whereas the S&P 500 and PFTS are significant net transmitters. Moreover, analysis of different periods, including before and during COVID-19 and before the Russian-U war, provides insights into the changing patterns of interconnectedness and spillover effects during these events. This study contributes to a better understanding of the interdependency and transmission mechanisms among equity markets and highlights the importance of considering external factors and geopolitical events in formulating risk management and investment strategies.

Dynamic connectedness and network in the high moments of cryptocurrency, stock, and commodity markets

This study examines the connectedness in high-order moments between cryptocurrency, major stock (U.S., U.K., Eurozone, and Japan), and commodity (gold and oil) markets. Using intraday data from 2020 to 2022 and the time and frequency connectedness models of Diebold and Yilmaz (Int J Forecast 28(1):57-66, 2012) and Baruník and Křehlík (J Financ Econom 16(2):271-296, 2018), we investigate spillovers among the markets in realized volatility, the jump component of realized volatility, realized skewness, and realized kurtosis. These higher-order moments allow us to identify the unique characteristics of financial returns, such as asymmetry and fat tails, thereby capturing various market risks such as downside risk and tail risk. Our results show that the cryptocurrency, stock, and commodity markets are highly connected in terms of volatility and in the jump component of volatility, while their connectedness in skewness and kurtosis is smaller. Moreover, jump and volatility connectedness are more persistent than that of skewness and kurtosis connectedness. Our rolling-window analysis of the connectedness models shows that connectedness varies over time across all moments, and tends to increase during periods of high uncertainty. Finally, we show the potential of gold and oil as hedging and safe-haven investments for other markets given that they are the least connected to other markets across all moments and investment horizons. Our findings provide useful information for designing effective portfolio management and cryptocurrency regulations.

Time-frequency co-movement and risk connectedness among cryptocurrencies: new evidence from the higher-order moments before and during the COVID-19 pandemic

Analyzing comovements and connectedness is critical for providing significant implications for crypto-portfolio risk management. However, most existing research focuses on the lower-order moment nexus (i.e. the return and volatility interactions). For the first time, this study investigates the higher-order moment comovements and risk connectedness among cryptocurrencies before and during the COVID-19 pandemic in both the time and frequency domains. We combine the realized moment measures and wavelet coherence, and the newly proposed time-varying parameter vector autoregression-based frequency connectedness approach (Chatziantoniou et al. in Integration and risk transmission in the market for crude oil a time-varying parameter frequency connectedness approach. Technical report, University of Pretoria, Department of Economics, 2021) using intraday high-frequency data. The empirical results demonstrate that the comovement of realized volatility between BTC and other cryptocurrencies is stronger than that of the realized skewness, realized kurtosis, and signed jump variation. The comovements among cryptocurrencies are both time-dependent and frequency-dependent. Besides the volatility spillovers, the risk spillovers of high-order moments and jumps are also significant, although their magnitudes vary with moments, making them moment-dependent as well and are lower than volatility connectedness. Frequency connectedness demonstrates that the risk connectedness is mainly transmitted in the short term (1-7 days). Furthermore, the total dynamic connectedness of all realized moments is time-varying and has been significantly affected by the outbreak of the COVID-19 pandemic. Several practical implications are drawn for crypto investors, portfolio managers, regulators, and policymakers in optimizing their investment and risk management tactics.