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Are Islamic gold-backed cryptocurrencies different?

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  • Aloui, Chaker
  • Hamida, Hela ben
  • Yarovaya, Larisa

Abstract

We assess the differential impact of geopolitical risk on Islamic and conventional gold backed cryptocurrencies using a multivariate Generalized Autoregressive Conditional Heteroscedasticity (M-GARCH) modeling. We unveil that Islamic gold-backed cryptocurrencies behave differently from their conventional counterparts. Sharia compliant cryptocurrencies are positively correlated to the yellow metal, while the conventional ones are weakly and negatively associated to gold. We find that the geopolitical risk intensifies the dependency of GBC to gold returns and volatility. Our results are of great interest for policy makers, Islamic portfolio managers and digital currency traders when undertaken their investment and hedging strategies during periods of high uncertainty and worsen geopolitical circumstances.

Suggested Citation

  • Aloui, Chaker & Hamida, Hela ben & Yarovaya, Larisa, 2021. "Are Islamic gold-backed cryptocurrencies different?," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320302907
    DOI: 10.1016/j.frl.2020.101615
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    Cited by:

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    2. Fakhfekh, Mohamed & Bejaoui, Azza & Bariviera, Aurelio F. & Jeribi, Ahmed, 2024. "Dependence structure between NFT, DeFi and cryptocurrencies in turbulent times: An Archimax copula approach," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
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    4. Wasiuzzaman, Shaista & Muhd Azwan, Ayu Nadhirah & Hj Nordin, Aina Nazurah, 2023. "Analysis of the performance of Islamic gold-backed cryptocurrencies during the bear market of 2020," Emerging Markets Review, Elsevier, vol. 54(C).
    5. Long, Huaigang & Demir, Ender & Będowska-Sójka, Barbara & Zaremba, Adam & Shahzad, Syed Jawad Hussain, 2022. "Is geopolitical risk priced in the cross-section of cryptocurrency returns?," Finance Research Letters, Elsevier, vol. 49(C).
    6. Matthias Hafner & Marco Henriques Pereira & Helmut Dietl & Juan Beccuti, 2023. "The four types of stablecoins: A comparative analysis," Papers 2308.07041, arXiv.org.
    7. Ahmet Faruk Aysan & Ali Polat & Hasan Tekin & Ahmet Tunali, 2022. "The Ascent of Geopolitics: Scientometric Analysis and Ramifications of Geopolitical Risk," Working Papers hal-03638273, HAL.
    8. Jana, Rabin K., 2024. "Are metaverse coins more prone to geopolitical risk than traditional crypto assets?," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 436-447.
    9. Yousaf, Imran & Pham, Linh & Goodell, John W., 2024. "Dynamic spillovers between leading cryptocurrencies and derivatives tokens: Insights from a quantile VAR approach," International Review of Financial Analysis, Elsevier, vol. 94(C).
    10. Awad Asiri & Mohammed Alnemer & M. Ishaq Bhatti, 2023. "Interconnectedness of Cryptocurrency Uncertainty Indices with Returns and Volatility in Financial Assets during COVID-19," JRFM, MDPI, vol. 16(10), pages 1-18, September.
    11. Mohammad Sahabuddin & Md. Nazmus Sakib & Md. Mahbubur Rahman & Adamu Jibir & Mochammad Fahlevi & Mohammed Aljuaid & Sandra Grabowska, 2023. "The Evolution of FinTech in Scientific Research: A Bibliometric Analysis," Sustainability, MDPI, vol. 15(9), pages 1-16, April.
    12. Lennart Ante & Ingo Fiedler & Jan Marius Willruth & Fred Steinmetz, 2023. "A Systematic Literature Review of Empirical Research on Stablecoins," FinTech, MDPI, vol. 2(1), pages 1-14, January.
    13. Yousaf, Imran & Yarovaya, Larisa, 2022. "Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    14. Hoque, Mohammad Enamul & Billah, Mabruk & Alam, Md Rafayet & Tiwari, Aviral Kumar, 2024. "Gold-backed cryptocurrencies: A hedging tool against categorical and regional financial stress," Global Finance Journal, Elsevier, vol. 60(C).
    15. Ali, Shoaib & Naveed, Muhammad & Hanif, Hasan & Gubareva, Mariya, 2024. "The resilience of Shariah-compliant investments: Probing the static and dynamic connectedness between gold-backed cryptocurrencies and GCC equity markets," International Review of Financial Analysis, Elsevier, vol. 91(C).
    16. 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).

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    More about this item

    Keywords

    Islamic cryptocurrencies; Gold-backed cryptocurrencies; GJR-GARCH; DCC; Geopolitical risk;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F3 - International Economics - - International Finance
    • F39 - International Economics - - International Finance - - - Other

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