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Co-movements between Bitcoin and Gold: A wavelet coherence analysis

Author

Listed:
  • Sang Hoon Kang

    (PNU - Pusan National University, University of South Australia [Adelaide])

  • Ron Mciver

    (University of South Australia [Adelaide])

  • Jose Arreola Hernandez

    (ESC [Rennes] - ESC Rennes School of Business)

Abstract

In this paper, we use dynamic conditional correlations (DCCs) and wavelet coherence to examine the hedging and diversification properties of gold futures vis-à-vis Bitcoin prices. Our research aims to reveal whether the bubble patterns of behavior in gold futures prices can be used to hedge against the bubble behavior in the Bitcoin market in the short-term, and vice versa; as well as whether each can be used to manage and hedge overall market and sector downside risk of the other asset/commodity. We find evidence of volatility persistence, causality, and phase differences between Bitcoin and gold futures prices. Contagion is observed to increase during the European sovereign debt crisis. Wavelet coherence results indicate a relatively high degree of co-movement across the 8–16 weeks frequency band between Bitcoin and gold futures prices for the 2012–2015 time period.

Suggested Citation

  • Sang Hoon Kang & Ron Mciver & Jose Arreola Hernandez, 2019. "Co-movements between Bitcoin and Gold: A wavelet coherence analysis," Post-Print hal-02468160, HAL.
    • Handle: RePEc:hal:journl:hal-02468160
    DOI: 10.1016/j.physa.2019.04.124
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    More about this item

    Keywords

    Co-movement; Wavelet coherence analysis; Causality; Gold futures; Bitcoin;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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