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Does climate risk drive digital asset returns?

Author

Listed:
  • Abdullah, Mohammad
  • Adeabah, David
  • Lee, Chi-Chuan
  • Abakah, Emmanuel Joel Aikins
  • Bhuiyan, Rubaiyat Ahsan

Abstract

This research employs quantile-on-quantile regression and the quantile coherency method to examine the asymmetric effects of various climate-related risks (physical and transition) across different states (from high to low) on digital assets, including the returns from cryptocurrencies, non-fungible tokens (NFTs), and decentralized finance (DeFi). The findings indicate that climate-related risks negatively affect the returns of cryptocurrencies, NFTs, and DeFi assets in the upper quantiles, meaning that these risks reduce returns. Conversely, in the lower quantiles their impact is inverse, highlighting the asymmetric influence of climate-related risks on cryptocurrencies, NFTs, and the DeFi market.

Suggested Citation

  • Abdullah, Mohammad & Adeabah, David & Lee, Chi-Chuan & Abakah, Emmanuel Joel Aikins & Bhuiyan, Rubaiyat Ahsan, 2025. "Does climate risk drive digital asset returns?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 666(C).
    • Handle: RePEc:eee:phsmap:v:666:y:2025:i:c:s0378437125001827
    DOI: 10.1016/j.physa.2025.130530
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    More about this item

    Keywords

    NFTs; Cryptocurrencies; DeFi; Climate risks; Physical risk; Transition risk; Digital assets;
    All these keywords.

    JEL classification:

    • 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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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