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Aggregate, asymmetric and frequency-based spillover among equity, precious metals, and cryptocurrency

Author

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  • Bhanja, Niyati
  • Shah, Adil Ahmad
  • Dar, Arif Billah

Abstract

This study evaluates the portfolio diversification potential of different classes of assets-equity, cryptocurrency and precious metals-using total, asymmetric and frequency-based spillover transmission framework. The VAR-based generalized variance decomposition method is used to analyse the daily prices of S&P 500, bitcoin, gold, silver and platinum between April 2011 through January 2021. The results of aggregate spillover support bitcoin as a potential diversifier due to its isolation from other sets of assets. The decomposition of overall spillover into downside and upside spillover reveals a higher downside connectedness than the upside, suggesting an asymmetric interdependence amongst these markets. Moreover, the frequency based aggregate spillovers suggest the connectedness is driven mostly by the shorter time-horizons. The study provides important policy implications for market participants with distinct investment objectives.

Suggested Citation

  • Bhanja, Niyati & Shah, Adil Ahmad & Dar, Arif Billah, 2023. "Aggregate, asymmetric and frequency-based spillover among equity, precious metals, and cryptocurrency," Resources Policy, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:jrpoli:v:80:y:2023:i:c:s0301420722005888
    DOI: 10.1016/j.resourpol.2022.103145
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    2. Kyriazis, Nikolaos & Papadamou, Stephanos & Tzeremes, Panayiotis & Corbet, Shaen, 2024. "Quantifying spillovers and connectedness among commodities and cryptocurrencies: Evidence from a Quantile-VAR analysis," Journal of Commodity Markets, Elsevier, vol. 33(C).
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    4. Luqman, Muhammad & Mugheri, Adil & Ahmad, Najid & Soytas, Ugur, 2023. "Casting shadows on natural resource commodity markets: Unraveling the quantile dilemma of gold and crude oil prices," Resources Policy, Elsevier, vol. 86(PA).
    5. Mensi, Walid & Rehman, Mobeen Ur & Vo, Xuan Vinh & Kang, Sang Hoon, 2024. "Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 449-479.
    6. Peciulis Tomas & Vasiliauskaite Asta, 2024. "Effect of Monetary Policy Decisions and Announcements on the Price of Cryptocurrencies: An Elastic-Net With Arima Residuals Approach," Economics and Culture, Sciendo, vol. 21(1), pages 77-92.
    7. Shafique Ur Rehman & Touqeer Ahmad & Wu Dash Desheng & Amirhossein Karamoozian, 2024. "Analyzing selected cryptocurrencies spillover effects on global financial indices: Comparing risk measures using conventional and eGARCH-EVT-Copula approaches," Papers 2407.15766, arXiv.org.
    8. Waqas Hanif & Hee-Un Ko & Linh Pham & Sang Hoon Kang, 2023. "Dynamic connectedness and network in the high moments of cryptocurrency, stock, and commodity markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-40, December.

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    More about this item

    Keywords

    Precious metals; Equity; COVID-19; Spillover asymmetry; Bitcoin;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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