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Investigating the dynamic relationship between litigation funding, gold, bitcoin and the stock market: The case of Australia

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  • Singh, Amanjot

Abstract

Litigation funding is gradually growing in Australia, although, there remains a lack of understanding regarding its dynamic relationship with other assets. Litigation funding covers litigant’s lawsuit-related expenses using the legal outcome as collateral. This study investigates the dynamic relationship between litigation funding, Gold, Bitcoin and the stock market using data from July 2015 to July 2020. Three important findings emerge by employing return spillover effects, Markov regime-switches and dynamic correlations; (1) litigation funding and the stock market share a lower degree of correlation with each other; (2) capital started flowing away from the stock market to litigation funding after the COVID-19 market shock; and (3) the dynamic correlations between litigation funding and Gold (Bitcoin) started increasing (decreasing) after the COVID-19 market shock. Because the judgement or settlement amount is a contingent outcome, litigation funding is immune from the market shocks, and relevant for portfolio diversification and other investment strategies.

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  • Singh, Amanjot, 2021. "Investigating the dynamic relationship between litigation funding, gold, bitcoin and the stock market: The case of Australia," Economic Modelling, Elsevier, vol. 97(C), pages 45-57.
    • Handle: RePEc:eee:ecmode:v:97:y:2021:i:c:p:45-57
    DOI: 10.1016/j.econmod.2021.01.007
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    Cited by:

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    2. Virginie Terraza & Aslı Boru İpek & Mohammad Mahdi Rounaghi, 2024. "The nexus between the volatility of Bitcoin, gold, and American stock markets during the COVID-19 pandemic: evidence from VAR-DCC-EGARCH and ANN models," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-34, December.
    3. Ftiti, Zied & Ben Ameur, Hachmi & Louhichi, Waël, 2021. "Does non-fundamental news related to COVID-19 matter for stock returns? Evidence from Shanghai stock market," Economic Modelling, Elsevier, vol. 99(C).
    4. Bojaj, Martin M. & Muhadinovic, Milica & Bracanovic, Andrej & Mihailovic, Andrej & Radulovic, Mladen & Jolicic, Ivan & Milosevic, Igor & Milacic, Veselin, 2022. "Forecasting macroeconomic effects of stablecoin adoption: A Bayesian approach," Economic Modelling, Elsevier, vol. 109(C).
    5. Amanjot Singh, 2022. "COVID‐19 and ESG preferences: Corporate bonds versus equities," International Review of Finance, International Review of Finance Ltd., vol. 22(2), pages 298-307, June.
    6. Kyriazis, Nikolaos & Papadamou, Stephanos & Tzeremes, Panayiotis & Corbet, Shaen, 2023. "Can cryptocurrencies provide a viable hedging mechanism for benchmark index investors?," Research in International Business and Finance, Elsevier, vol. 64(C).
    7. Walid Mensi & Xuan Vinh Vo & Sang Hoon Kang, 2024. "Upward and Downward Multifractality and Efficiency of Chinese and Hong Kong Stock Markets," Computational Economics, Springer;Society for Computational Economics, vol. 64(6), pages 3207-3242, December.
    8. Wang, Xuetong & Fang, Fang & Ma, Shiqun & Xiang, Lijin & Xiao, Zumian, 2024. "Dynamic volatility spillover among cryptocurrencies and energy markets: An empirical analysis based on a multilevel complex network," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    9. Cui, Tianxiang & Ding, Shusheng & Jin, Huan & Zhang, Yongmin, 2023. "Portfolio constructions in cryptocurrency market: A CVaR-based deep reinforcement learning approach," Economic Modelling, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    Assets; Bitcoin; GARCH; Litigation funders; Spillover effects;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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