IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-21-01085.html
   My bibliography  Save this article

Examining the Dynamic Asset Market Linkages under the COVID-19 Global Pandemic

Author

Listed:
  • Akihiko Noda

    (School of Commerce, Meiji University)

Abstract

This study examines dynamic asset market linkages during the global COVID-19 pandemic based on market efficiency in the sense of Fama (1970). In particular, we estimate the joint degree of market efficiency by applying a generalized least squares (GLS)-based time-varying autoregressive (TV-VAR) model of Ito et al. (2014, 2017). The results show that (1) the joint degree of market efficiency changes widely over time, consistent with the adaptive market hypothesis of Lo's (2004), (2) the global COVID-19 pandemic may have eliminated arbitrage and improved market efficiency through enhanced linkages among asset markets, and (3) market efficiency has continued to decline due to the Bitcoin bubble that emerged at the end of 2020.

Suggested Citation

  • Akihiko Noda, 2022. "Examining the Dynamic Asset Market Linkages under the COVID-19 Global Pandemic," Economics Bulletin, AccessEcon, vol. 42(2), pages 653-661.
    • Handle: RePEc:ebl:ecbull:eb-21-01085
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I2-P54.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    2. Conlon, Thomas & McGee, Richard, 2020. "Safe haven or risky hazard? Bitcoin during the Covid-19 bear market," Finance Research Letters, Elsevier, vol. 35(C).
    3. Bouri, Elie & Molnár, Peter & Azzi, Georges & Roubaud, David & Hagfors, Lars Ivar, 2017. "On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier?," Finance Research Letters, Elsevier, vol. 20(C), pages 192-198.
    4. Baur, Dirk G. & Dimpfl, Thomas & Kuck, Konstantin, 2018. "Bitcoin, gold and the US dollar – A replication and extension," Finance Research Letters, Elsevier, vol. 25(C), pages 103-110.
    5. Corbet, Shaen & Larkin, Charles & Lucey, Brian, 2020. "The contagion effects of the COVID-19 pandemic: Evidence from gold and cryptocurrencies," Finance Research Letters, Elsevier, vol. 35(C).
    6. Bouri, Elie & Gupta, Rangan & Tiwari, Aviral Kumar & Roubaud, David, 2017. "Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions," Finance Research Letters, Elsevier, vol. 23(C), pages 87-95.
    7. Chan, Wing Hong & Le, Minh & Wu, Yan Wendy, 2019. "Holding Bitcoin longer: The dynamic hedging abilities of Bitcoin," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 107-113.
    8. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    9. Khuntia, Sashikanta & Pattanayak, J.K., 2018. "Adaptive market hypothesis and evolving predictability of bitcoin," Economics Letters, Elsevier, vol. 167(C), pages 26-28.
    10. Manuel Dominguez & Ignacio Lobato, 2003. "Testing the Martingale Difference Hypothesis," Econometric Reviews, Taylor & Francis Journals, vol. 22(4), pages 351-377.
    11. Caferra, Rocco & Vidal-Tomás, David, 2021. "Who raised from the abyss? A comparison between cryptocurrency and stock market dynamics during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 43(C).
    12. Noda, Akihiko, 2016. "A test of the adaptive market hypothesis using a time-varying AR model in Japan," Finance Research Letters, Elsevier, vol. 17(C), pages 66-71.
    13. Akhtaruzzaman, Md & Boubaker, Sabri & Lucey, Brian M. & Sensoy, Ahmet, 2021. "Is gold a hedge or a safe-haven asset in the COVID–19 crisis?," Economic Modelling, Elsevier, vol. 102(C).
    14. Klein, Tony & Pham Thu, Hien & Walther, Thomas, 2018. "Bitcoin is not the New Gold – A comparison of volatility, correlation, and portfolio performance," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 105-116.
    15. Al-Yahyaee, Khamis Hamed & Mensi, Walid & Yoon, Seong-Min, 2018. "Efficiency, multifractality, and the long-memory property of the Bitcoin market: A comparative analysis with stock, currency, and gold markets," Finance Research Letters, Elsevier, vol. 27(C), pages 228-234.
    16. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    17. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    18. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Flori, Andrea, 2019. "News and subjective beliefs: A Bayesian approach to Bitcoin investments," Research in International Business and Finance, Elsevier, vol. 50(C), pages 336-356.
    2. Andrea Flori, 2019. "Cryptocurrencies In Finance: Review And Applications," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(05), pages 1-22, August.
    3. Aurelio F. Bariviera & Ignasi Merediz‐Solà, 2021. "Where Do We Stand In Cryptocurrencies Economic Research? A Survey Based On Hybrid Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 377-407, April.
    4. Hsu, Shu-Han & Sheu, Chwen & Yoon, Jiho, 2021. "Risk spillovers between cryptocurrencies and traditional currencies and gold under different global economic conditions," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    5. Hanif, Waqas & Areola Hernandez, Jose & Troster, Victor & Kang, Sang Hoon & Yoon, Seong-Min, 2022. "Nonlinear dependence and spillovers between cryptocurrency and global/regional equity markets," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    6. Rizvi, Syed Kumail Abbas & Naqvi, Bushra & Mirza, Nawazish & Umar, Muhammad, 2022. "Safe haven properties of green, Islamic, and crypto assets and investor's proclivity towards treasury and gold," Energy Economics, Elsevier, vol. 115(C).
    7. Conlon, Thomas & Corbet, Shaen & McGee, Richard J., 2020. "Are cryptocurrencies a safe haven for equity markets? An international perspective from the COVID-19 pandemic," Research in International Business and Finance, Elsevier, vol. 54(C).
    8. Ha, Le Thanh & Nham, Nguyen Thi Hong, 2022. "An application of a TVP-VAR extended joint connected approach to explore connectedness between WTI crude oil, gold, stock and cryptocurrencies during the COVID-19 health crisis," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    9. Assaf, Ata & Bhandari, Avishek & Charif, Husni & Demir, Ender, 2022. "Multivariate long memory structure in the cryptocurrency market: The impact of COVID-19," International Review of Financial Analysis, Elsevier, vol. 82(C).
    10. Chu, Jeffrey & Chan, Stephen & Zhang, Yuanyuan, 2021. "Bitcoin versus high-performance technology stocks in diversifying against global stock market indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 580(C).
    11. Huang, Yingying & Duan, Kun & Mishra, Tapas, 2021. "Is Bitcoin really more than a diversifier? A pre- and post-COVID-19 analysis," Finance Research Letters, Elsevier, vol. 43(C).
    12. Mizerka, Jacek & Stróżyńska-Szajek, Agnieszka & Mizerka, Piotr, 2020. "The role of Bitcoin on developed and emerging markets – on the basis of a Bitcoin users graph analysis," Finance Research Letters, Elsevier, vol. 35(C).
    13. Demiralay, Sercan & Gencer, Hatice Gaye & Bayraci, Selcuk, 2021. "How do Artificial Intelligence and Robotics Stocks co-move with traditional and alternative assets in the age of the 4th industrial revolution? Implications and Insights for the COVID-19 period," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    14. Jiang, Yonghong & Wu, Lanxin & Tian, Gengyu & Nie, He, 2021. "Do cryptocurrencies hedge against EPU and the equity market volatility during COVID-19? – New evidence from quantile coherency analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    15. Diniz-Maganini, Natalia & Diniz, Eduardo H. & Rasheed, Abdul A., 2021. "Bitcoin’s price efficiency and safe haven properties during the COVID-19 pandemic: A comparison," Research in International Business and Finance, Elsevier, vol. 58(C).
    16. Khaki, Audil & Prasad, Mason & Al-Mohamad, Somar & Bakry, Walid & Vo, Xuan Vinh, 2023. "Re-evaluating portfolio diversification and design using cryptocurrencies: Are decentralized cryptocurrencies enough?," Research in International Business and Finance, Elsevier, vol. 64(C).
    17. Ali, Fahad & Bouri, Elie & Naifar, Nader & Shahzad, Syed Jawad Hussain & AlAhmad, Mohammad, 2022. "An examination of whether gold-backed Islamic cryptocurrencies are safe havens for international Islamic equity markets," Research in International Business and Finance, Elsevier, vol. 63(C).
    18. Kliber, Agata & Marszałek, Paweł & Musiałkowska, Ida & Świerczyńska, Katarzyna, 2019. "Bitcoin: Safe haven, hedge or diversifier? Perception of bitcoin in the context of a country’s economic situation — A stochastic volatility approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 246-257.
    19. Ren, Xiaohang & Wang, Rui & Duan, Kun & Chen, Jinyu, 2022. "Dynamics of the sheltering role of Bitcoin against crude oil market crash with varying severity of the COVID-19: A comparison with gold," Research in International Business and Finance, Elsevier, vol. 62(C).
    20. Umar, Muhammad & Su, Chi-Wei & Rizvi, Syed Kumail Abbas & Shao, Xue-Feng, 2021. "Bitcoin: A safe haven asset and a winner amid political and economic uncertainties in the US?," Technological Forecasting and Social Change, Elsevier, vol. 167(C).

    More about this item

    Keywords

    COVID-19; Asset Market Linkages; Adaptive Market Hypothesis; Efficient Market Hypothesis; GLS-Based Time-Varying Model Approach.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-21-01085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.