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4007. Spillovers between risk indices and the cryptocurrency market

Invited abstract in session MB-8: AI in Eco-Finance: Time, Space, and Networks, stream AI & Innovation in Sustainable Finance.

Monday, 10:30-12:00
Room: 1020 (building: 202)

Authors (first author is the speaker)

1. Barbara Będowska-Sójka
Department of Econometrics, Poznan University of Economics and Business
2. Joanna Górka
Nicolaus Copernicus University in Toruń

Abstract

The aim of the paper is to examine the dependence between uncertainty indices and the uncertainty of cryptocurrencies. The focus is on volatility spillovers between different risk proxy indices: geopolitical events, economic policy, commodity, equity and bond markets, and cryptocurrency uncertainty indices. The spillovers are used in networks, and various centrality measures are calculated to test which risk index or cryptocurrency is leading the market changes. Based on weekly data from April 2014 to March 2024, covering several market ups and downs, it is found that the transmission from uncertainty indices to cryptocurrency uncertainties is rather weak on average, but accelerates during turbulent periods such as the Covid-19 outbreak or the start of the Ukraine war. Overall, we conclude that while cryptocurrency pricing is largely decoupled from economic risk, the ability of the asset class to serve as a portfolio hedge may be limited.

Keywords

Status: accepted

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