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Dynamic risk and hedging strategies in post-COVID digital asset sectors

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  • Han, SeungOh

Abstract

Time-varying parameter vector autoregressive models analyze post-pandemic risk spillover dynamics within equally-weighted digital asset sectors, focusing on the year following the COVID-19 pandemic declaration. This analysis highlights an initial surge in pandemic-induced spillovers, followed by a gradual decline, underscoring market resilience. Stablecoins are identified as primary net receivers of volatility, while Smart-contract, Binance-chain, and DeFi sectors emerge as main net transmitters. Frequency-based analysis reveals these sectors predominantly drive short-term spillover dynamics. Long/short portfolio assessments pinpoint Smart-contract tokens as the most effective post-pandemic hedgers, with NFT, Metaverse, and DeFi showing substantial increases in hedging effectiveness. This identification of efficient hedgers proves consistent across various specifications, including value-weighted indices, individual assets, alternative post-outbreak periods, extended post-pandemic periods, and different lag lengths.

Suggested Citation

  • Han, SeungOh, 2025. "Dynamic risk and hedging strategies in post-COVID digital asset sectors," Research in International Business and Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:riibaf:v:75:y:2025:i:c:s027553192400535x
    DOI: 10.1016/j.ribaf.2024.102742
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    More about this item

    Keywords

    Digital asset sectors; COVID-19 pandemic; TVP-VAR; Time connectedness; Frequency connectedness; Hedged portfolios;
    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
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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