Article

Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis

December 2021
Pacific-Basin Finance Journal

DOI:10.1016/j.pacfin.2021.101705

Authors:

Imran Yousaf

Prince Sultan University

Larisa Yarovaya

University of Southampton

This study examines the return and volatility transmission between the Islamic gold-backed cryptocurrencies (Onegram and X8X) and global Islamic equity sectors during the pre-COVID and COVID-19 periods. We also estimate the optimal weights, hedge ratios, and hedging effectiveness for all pairs of markets. Our results suggest that the COVID-19 crisis intensified the spillover effect between the selected Islamic assets. We show that investors could increase their allocations in Onegram gold-backed cryptocurrency to reduce the risk of the equity sector portfolio during the COVID-19 pandemic. Moreover, the hedging costs for all pairs have increased during the COVID-19 period in comparison to the pre-pandemic level. Finally, the analysis of hedging effectiveness suggests that investors can reduce the risk of Islamic sectorial equity portfolios by adding the Islamic Sharia-based cryptocurrencies during both sample periods. <br/

Will Muslims integrate an Islamic accounting principle ( zakat ) into the fi nancial paradigm reshaped by cryptocurrencies ? Insights into cryptocurrencies holder perspectives

Article

Dec 2024

Purpose – Muslim engagement with cryptocurrencies (CC) raises fundamental questions rooted in religious faith: How should Muslims integrate Islamic Accounting principles like zakat into this new and rapidly evolving financial paradigm? Thus, it is essential to understand CC holders’ perceptions thoroughly and whether they are willing to pay zakat using crypto assets. This research aims to explore factors influencing Muslim CC holders’ intention to pay zakat on CC, emphasizing financial risk, theory of planned behavior (TPB) constructs and Shariah compliance’s moderating role. Design/methodology/approach – This attempt uses a quantitative approach through a cross-sectional research design, using purposive sampling to gather data from Muslim CC holders. An extended theory of planned behavior (ETPB) model is applied to comprehensively analyze the key factors influencing intentions to pay zakat on CC. SmartPLS software is used to generate meaningful findings Findings – The study finds that financial risk associated with CC exerted a negative influence on TPB constructs, attitude (ATT), social norms (SN) and perceived behavioral control regarding zakat on CC (PBC). However, ATT and PBC positively shaped holders’ intention to pay zakat on CC. Interestingly, Shariah compliance-moderated interactions of TPB constructs on payment intentions were statistically significant. Originality/value – With the rise of CC, a profound transformation is underway in the financial landscape. As this evolution unfolds, it becomes increasingly essential for stakeholders to understand how zakat could fit into such a new and rapidly evolving paradigm. A pioneering effort was made in this study by exploring MuslimCC holders’ intentions to fulfill zakat obligations, bridging a significant gap in the literature.

The impact of the Russia-Ukraine conflict on market volatility: stability of Islamic cryptocurrency

Article

Full-text available

Oct 2024

Purpose - This research investigates how the Russia-Ukraine conflict affects the volatility of cryptocurrencies, with a specific focus on the comparative stability of Islamic gold-backed cryptocurrencies versus conventional cryptocurrencies, such as Bitcoin.Method - Utilizing the GARCH model, this study examines the risk factors and volatility transmission among cryptocurrencies (Bitcoin and Tether-gold), traditional financial markets (gold and stock markets), and their interrelationships during the conflict period. The study employs the daily closing prices of Bitcoin, Tether-gold, gold, the SP 500, and the Dow Jones Islamic Market Index from February 7, 2020, to November 30, 2023.Result - Bitcoin experienced significant volatility during the conflict, while the Tether-gold remained more stable. Islamic gold-backed cryptocurrencies have proven to be more stable than conventional ones during geopolitical crises.Implication - The findings offer valuable insights for investors seeking safe-haven assets during periods of economic uncertainty. Gold-backed cryptocurrencies present a more stable investment option compared to conventional cryptocurrencies, especially for investors adhering to Shariah principles.Originality - This research highlights the stability of Islamic gold-backed cryptocurrencies during geopolitical events, contributing to the understanding of safe-haven assets and offering practical implications for portfolio diversification and risk management.

Islamic cryptocurrency integration for enhanced sustainable finance: evidence from time-frequency volatility transmission investigation

Article

Full-text available

Aug 2024

Assessing Bitcoin, gold and gold-backed cryptocurrencies as safe havens for energy and agricultural commodities: insights from COVID-19, Russia–Ukraine conflict and SVB collapse

Article

May 2024

Purpose: This paper aims to investigate the safe haven feature of Bitcoin, gold and two gold-backed cryptocurrencies (DGX and PAXG) against energy and agricultural commodities (crude oil, natural gas and wheat) during the COVID-19 pandemic, the Russia–Ukraine conflict and the Silicon Valley Bank (SVB) collapse. Design/methodology/approach: The authors use the threshold GARCH (T-GARCH)-asymmetric dynamic conditional correlation (ADCC) model to evaluate the asymmetric dynamic conditional correlation between the return series and compare the diversifying, hedging and safe-haven ability of Bitcoin, gold and the two gold-backed cryptocurrencies (DGX and PAXG) against financial swings in the commodity market during the COVID-19 outbreak, the Russian–Ukrainian military conflict and SVB collapse. The authors also calculate the hedging ratios (HR) and hedging effectiveness index (HE). The authors finally use the wavelet coherence (WC) approach to check our results’ robustness and further investigate the impact of the three crises on the relationship between Bitcoin, gold gold-backed cryptocurrencies and commodities. Findings: The results show that PAXG serves as a strong hedging instrument while gold, Bitcoin and DGX act as strong diversifiers during normal times. During crises, gold outperforms Bitcoin as a diversifier and a safe haven against commodities. Gold-backed cryptocurrencies also exhibit strong performance as diversifiers and safe havens. HR results indicate that Bitcoin and DGX are more cost-effective for commodities risk mitigation than gold and PAXG. In terms of hedging effectiveness, gold and PAXG emerge as the best hedging instruments for commodities, while DGX is considered the worst one. Bitcoin shows superior hedging against oil compared to wheat and gas risks. Moreover, the results of the WC approach confirm those of the T-GARCH-ADCC results in both the short and long run. Originality/value: This paper provides a comprehensive analysis of the diversification ability of gold, Bitcoin and gold-backed cryptocurrencies during different crises (the COVID-19 pandemic, the Russia–Ukraine conflict and the SVB collapse). By taking into consideration gold-backed cryptocurrencies, the authors expand the understanding of safe havens beyond conventional assets.

Tail risk transmission in technology-driven markets

Article

Jun 2023
Global Finance J

The soaring popularity of blockchain investing and cryptocurrencies has captured the attention of policymakers and investors alike. However, as cryptocurrencies remain the most volatile and high-risk investment options, they have displayed extreme asymmetric patterns over time. Considering these concerns, we conducted a comprehensive analysis of the tail risk transmission of these technology-driven markets using the Conditional autoregressive Value at risk (CAViaR) model, which sheds valuable light on the market's tail characteristics. We combined the CAViaR approach with the time-frequency methods proposed by Diebold and Yilmaz (2012) and Barunik and Krehlik (2018) to further enhance our analysis. Our results revealed a range of asymmetric economic and financial patterns across markets and highlighted the varying exposure of these markets to different circumstances over time. Finally, we investigated the impact of global factors on the tail risk transmission of technology-driven markets both in the long and short term. This study offers a wealth of insights for policymakers, investors, financial market participants, and scholars of digital finance to help navigate these rapidly evolving markets.

THE INTERCONNECTEDNESS PATTERN OF CRYPTOCURRENCIES AND ISLAMIC INVESTMENT CLASSES

Article

Full-text available

May 2023

Zaheer Anwer

This study explores the dynamic co-movement of Islamic asset classes and cryptocurrencies for the period 01 March, 2017 to 15 June, 2022 by employing Wavelet methodology. The Islamic investment classes are represented by Islamic equities, Islamic Socially responsible investments, Real estate investment trusts and Sukuk. The results reveal that in normal times, there is negligible co-movement of both the asset classes. By contrast, both the investment classes exhibit significant spillover effect during the health crisis period. An important implication from these findings is that both the asset classes offer diversification opportunity during normal times but not during extreme times.

Comovements and hedging effectiveness between conventional and Islamic cryptocurrencies: evidence from the COVID-19 pandemic

Article

Mar 2023
Int J Emerg Market

Abstract Purpose – This study examines the dynamics of the comovement and causal relationship between conventional (Bitcoin, Ethereum and Binance coin) and Islamic (OneGram, X8X token and HelloGold) cryptocurrencies. Design/methodology/approach – This study uses wavelet coherence approach to examine the timevarying lead-lag relationship between conventional and Islamic cryptocurrencies. Furthermore, the authors use BEKK-GARCH model to estimate the optimal weights, hedge ratio and hedging effectiveness in preCOVID-19 and during the COVID-19 period. Findings – The authors find no significant comovement in pre-COVID-19. However, the authors find significant positive comovement in conventional and Islamic cryptocurrencies at the beginning of the pandemic, and in most cases, conventional cryptocurrencies are leading. X8X and HelloGold have no/weak correlation with conventional cryptocurrencies, implying that investors can diversify the risk by making an Islamic and conventional cryptocurrencies portfolio. The authors also calculate the optimal weights, hedge ratio and hedging effectiveness using the BEKK-GARCH model. Based on the optimal weights, for the portfolios of conventional–Islamic cryptocurrencies, investors are suggested to increase their investment in Islamic cryptocurrencies during the COVID-19 than normal period. The results of hedge ratios show that hedging costs are higher during COVID-19 than before. Practical implications – The findings of the paper offer several practical policy implications for investors, portfolio manager, Shariah advisors and policymakers pertaining to asset allocation, risk management, forecasting and diversification. Specifically, investors can maximize the risk adjusted returns of their conventional cryptocurrencies portfolio by adding some portions of Islamic cryptocurrencies. Considering the comovement is time-varying, investors/manager should adjust their investment strategies frequently. For the entrepreneurs in crypto-industry, it is advised to introduce new Islamic cryptocurrencies, as it has a huge growth potential because of their distinct features and performance.

Analysis of Gold, Bitcoin, and Gold-Backed Cryptocurrencies as Safe Havens during Global Crises: A Focus on Artificial Intelligence Companies

Article

Full-text available

Dec 2024
Comput Econ

The rapid growth of the AI sector and its increasing influence highlight the need for effective asset selection for hedging and diversification in AI-focused portfolios. This study investigates the role of gold, Bitcoin, and gold-backed cryptocurrencies in diversifying portfolios centered around AI companies. By analyzing the dynamic correlations and portfolio implications of seven leading AI firms alongside Bitcoin, gold, DGX, and PAXG from April 30, 2021, to September 15, 2023—covering various crises—we utilized the ADCC-GJRGARCH model to explore these interactions. The findings reveal that PAXG and gold exhibit low dynamic correlations with AI firms, establishing them as valuable diversification tools. Additionally, our analysis of hedge ratios shows that PAXG and gold serve as effective hedges during geopolitical and economic instability. This study emphasizes the importance of dynamic portfolio management, reinforces gold’s role as a diversifier and safe haven, and highlights the value of integrating AI companies to achieve balanced growth and stability amidst uncertainty.

Connectedness Between Gold-Backed Cryptocurrencies and the G7 Stock Market Indices During Global Crises: Evidence From the Quantile Vector Autoregression Approach

Article

Jun 2024

The recent global crises have heightened financial market instability, surging the need for diversification, hedging, and safe haven assets to mitigate stock market risks. This study employs a Quantile Vector Autor-egression (Q-VAR) approach to analyze the interconnectedness between gold-backed cryptocurrencies and G7 stock market indices during crises spanning from December 1, 2020, to July 5, 2023. Our findings indicate a robust association between digital gold and financial assets, with a total connectedness index (TCI) of 58.64%. Remarkably, G7 stock indices emerge as significant contributors to market fluctuations compared to digital assets, exerting influence ranging from 24% to 37%, thereby underscoring the potential of gold-backed cryptocurrencies for effective diversification strategies. Dynamic analysis during crises indicates the pivotal role of DGX as a safe haven, alongside identifying NIKKEI as a significant net receiver. Furthermore, the total net directional connectedness examination corroborates the status of gold-backed cryptocurrencies as net receivers , reaffirming their safe-haven abilities. Intriguingly, an in-depth examination across quantiles validates symmetrical dynamic connectedness, with G7 indices predominantly functioning as net transmitters of spillover. Our empirical findings underscore the compelling safe-haven potential in gold-backed crypto-currencies, offering valuable insights for investors, policymakers, and portfolio optimization during turbulent market conditions.

Time-varying risk spillovers between renewable energy and Islamic stock markets: Evidence from the Russia-Ukraine conflict

Article

Mar 2024
Pac Basin Finance J

This paper examines the downside and upside risk spillovers between renewable energy and Islamic stock markets before and during the Russia-Ukraine crisis. We employ the VAR-ADCC model and conditional value at risk (CoVaR) techniques to estimate downside and upside risk spillovers. The results show that the risk spillovers are asymmetric for the majority of cases, but the degree of asymmetry varies across distributions and sub-samples before and during the Russia-Ukraine conflict. Specifically, the downside and upside risk spillover magnitude is not significant between renewable energy and Islamic stock markets of Malaysia, Turkey, and India during the Russia-Ukraine war compared to the pre-crisis period. These results imply that renewable energy markets are not sensitivitive to the Islamic stock markets of the three countries (Malaysia, Turkey, and India) during the Russia-Ukraine war. Our findings also imply that the Canadian Islamic stock markets provide diversification opportunities against renewable energy during the extreme downside risk spillovers. These findings provide interesting insights to portfolio managers and policymakers regarding important decisions like portfolio construction, hedging, and market stability.

Is digital gold a hedge, safe haven, or diversifier? An analysis of cryptocurrencies, DeFi tokens, and NFTs

Article

Jan 2024

DO ISLAMIC CRYPTOCURRENCIES PROVIDE DIVERSIFICATION OPPORTUNITIES TO INDONESIAN ISLAMIC INVESTORS? 442 Do Islamic Cryptocurrencies Provide Diversification Opportunities to Indonesian Islamic Investors?

Article

Full-text available

Aug 2022

This study examines whether Islamic gold-backed cryptocurrencies (Onegram and X8X) provide any diversification benefits to the Islamic investors of Indonesia. We study the co-movements between return and volatility of cryptocurrencies and Indonesian Islamic equity indices during the pre-COVID-19 and COVID-19 periods. We employ Multivariate Generalized Autoregressive Conditional Heteroscedastic-Dynamic Conditional Correlation (M-GARCH-DCC) and Continuous Wavelet Transforms (CWT) for this study. We find that the COVID-19 crisis enhanced the spillover effect among the Islamic gold-backed cryptocurrencies and Islamic equities. We also provide evidence that Indonesian investors may invest in cryptocurrencies to minimize the equity sector risks during the pandemic. Our results bear significant implications for portfolio diversification strategies for Indonesian investors.

Bitcoin Vs Gold: Which One is the Most Powerful in Boosting the Shariah Equity Index? Global Evidence

Article

Full-text available

May 2023

The study explores the most powerful between Bitcoin and Gold in boosting the Shariah Equity Index in Malaysia, the United Arab Emirates, China, Indonesia, The United States of America (USA), Japan, Oman, and Saudi Arabia in the short and long term. The study uses analysis of the first and second stages of the Granger Causality Test and Vector Error Correction Model (VECM), then Impulse Response Function (IRF) and Variance Decomposition (VDC) over the period 2013 to 2021. The finding proves that only Gold can affect the Islamic Equity Index in the short term, then Bitcoin and Gold proved to contribute equally to the Islamic Equity Index in the long term. However, Bitcoin has the potential to provide positively correlated shocks and dominate the value of Islamic equity indices in the long term. The results demonstrate that government intervention is decisive in maintaining the stability of the Shariah Equity Index from future Bitcoin threats. The study’s finding has practical implications for Islamic capital market Investors, Managers, and Authorities.

Volatility spillover and connectedness among REITs, NFTs, cryptocurrencies and other assets: Portfolio implications

Article

Mar 2023

We investigate the return and volatility spillovers among NFTs, REITs, and other major financial assets from January 2019 to November 2022, using connectedness approaches. The findings indicate that total return and volatility connectedness increased during the COVID-19 and the Russia-Ukraine war. REITs partially maintained their historical independence from shocks from other assets, while NFTs emerged as the new portfolio diversifiers. Findings suggest that investors can use REITs or a combination of NFTs, OIL, GOLD, and REITs with other assets to hedge against volatile assets during periods of financial turmoil. These findings have significant implications for heterogeneous market participants aiming to identify optimal portfolio diversifiers.

Stablecoin: A Story of (In)Stabilities and Co-Movements Written Through Wavelet

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Jan 2025

Stablecoins are crypto assets designed to maintain stable value by bridging fiat currencies and volatile crypto assets. Our study extends previous research by analyzing the instability and co-movement of major stablecoins (USDT, USDC, DAI, and TUSD) during significant economic events such as the COVID-19 pandemic and the collapses of Iron Finance, Terra-Luna, FTX, and Silicon Valley Bank (SVB). We investigated the temporal volatility and dynamic connections between stablecoins using wavelet techniques. Our results showed that the announcement of USDT’s listing on Coinbase in April 2021 significantly impacted the stability of stablecoins, evidenced by a decline in the power spectrum. This phenomenon has not been explored in the literature. Furthermore, the collapse of SVB was highly relevant to the stablecoin market. We observed high coherence between pairs during the pandemic, the Coinbase listing, and the collapse of SVB. After the collapse of Terra-Luna, USDT, USDC, and DAI became more connected in the medium term, with USDC and DAI extending in the long term despite a negative co-movement between USDT and the others. This study highlights the impact of exchange listings on the volatility of stablecoins, with implications for investors, regulators, and the cryptocurrency community, especially regarding the stability and safe integration of these assets into the financial system.

Return and Volatility Interaction between Islamic Indice and Bitcoin: A Comparison of Türkiye and Malaysia

Article

Full-text available

Jun 2024

With technology development, investment tools also vary. Money and capital market instruments are at the forefront of these, and virtual currencies have become investment tools. Because virtual currencies are not religiously permissible by many organizations causes the devout people to stay away from them. This study investigates the return and volatility interaction between Islāmic Indices and Bitcoin in Türkiye and Malaysia. The study uses weekly data for the period 24 November 2013-2 January 2022 obtained from investing.com. Multivariate Dynamic Conditional Correlation (DCC-GARCH) and multivariate dynamic stochastic volatility models were used to determine the volatility dispersion between Islāmic indices and Bitcoin. Results show that the volatilities of Türkiye Islāmic Index, Malaysia Hijrah Sharīʿah Index and Bitcoin are permanent. Volatility of Bitcoin, however, has no effect on the return of the Türkiye Islāmic Index and the Malaysian Hijrah Sharīʿah Index. Likewise, the volatility of Islāmic indices does not affect the return of Bitcoin. According to the results of the DC-MSV model, the volatility of Islāmic indices and the volatility of Bitcoin do not affect each other. This indicates that Islāmic index investors and Bitcoin investors differ.

Crypto Lending and Stablecoin De-Pegging: Key Risks and Challenges

Article

Jun 2024

Mathew Abraham

Can gold-backed cryptocurrencies have dynamic hedging and safe-haven abilities against DeFi and NFT assets?

Article

Full-text available

Apr 2024

Given that the interconnections of NFT and DeFi digital assets with other stablecoins still not sufficiently studied, this paper is two-fold. We first examine the dynamic conditional correlation between gold-backed cryptocurrencies and NFTs and DeFi assets during the period 02/11/2021-05/01/2023. We thereafter assess the diversification potential of gold-backed cryptocurrencies against NFTand DeFi. To this end, we use the time-varying Student's copula to investigate the cross-markets linkages among different assets in dynamic fashion. We afterwards compute the optimal hedging ratios and effectiveness index to better explore the effectiveness of portfolio risk management. Our findings clearly show that the degree of dependence between gold-backed cryptocurrencies and NFT and DeFi tokens tends to vary over time. Our results also display that gold-backed cryptocurrencies act as suitable hedging (or diversifying) assets during normal times. Nevertheless, such assets can be considered as robust safe havens during the 2022 bear market for the most of NFT and DeFi assets. More specifically, PAXG and PMGT are found to be the best safe haven instruments for both NFT and DeFi tokens. DGX also serves as safe-haven assets for some NFT and DeFi assets, but with a lower risk-mitigation capacity compared to PAXG and PMGT. In most cases, DGX tends to act as a strong diversifier. Its hedging feature is only recorded for the NFT Protocol (xNFT) and the DeFi token Chainlink (LINK). Our results are of particular interest to investors and portfolio managers who search for safe havens to mitigate the risk of their NFT and DeFi portfolios.

Navigating Uncertainty: The Role of Digital Assets

Article

Full-text available

Dec 2023

Afzol Husain

This research studies the dynamic connectedness among digital assets proxied by non-fungible tokens (NFTs), Islamic cryptocurrencies, and conventional cryptocurrencies with the US Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) indices. We also examine the hedge and safe haven properties of the aforementioned digital assets against the uncertainties. Using wavelet coherence analysis from 19 January 2018 to 31 October 2023, we show that NFTs react heterogeneously to changes in uncertainties while cryptocurrency reacts inversely. NFTs and conventional cryptocurrencies can only act as diversifiers, but neither as a hedge nor a safe haven against uncertainties. However, Islamic cryptocurrencies have the potential to act as both a hedge and a safe haven against uncertainties. Our findings shed light on the role of emerging digital assets in formulating investment strategies and ensuring stability in the financial markets. Originality/Value: Given the immense potential of digital assets, a remaining research gap concerns their interplay with uncertainty. In other words, given the presence of extreme market turmoil over recent years, no consensus is present in terms of highlighting the dynamic co-movement between digital assets such as NFT, Islamic cryptocurrencies, and global uncertainty factors. In addition to that, the lead-lag relationship among digital assets and uncertainties are also unknown till date. The current study fills this gap by providing robust evidence.

Spillovers and hedging effectiveness between islamic cryptocurrency and metal markets: Evidence from the COVID-19 outbreak

Article

Feb 2024
Int Rev Econ Finance

Dependence structure between NFT, DeFi and cryptocurrencies in turbulent times: An Archimax copula approach

Article

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Jan 2024
N Am J Econ Finance

Interconnectedness of Cryptocurrency Uncertainty Indices with Returns and Volatility in Financial Assets during COVID-19

Article

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Sep 2023

This paper investigates the dynamic relationship between cryptocurrency uncertainty indices and the movements in returns and volatility across spectrum of financial assets, comprising cryptocurrencies, precious metals, green bonds, and soft commodities. It employs a Time-Varying Parameter Vector Autoregressive (TVP-VAR) connectedness approach; the analysis covers both the entire sample period spanning August 2015 to 31 December 2021 and the distinct phase of COVID-19 pandemic. The findings of the study reveal the interconnectedness of returns within these asset classes during the COVID-19 pandemic. In this context, cryptocurrency uncertainty indices emerge as influential transmitters of shocks to other financial asset categories and it significantly escalates throughout the crisis period. Additionally, the outcomes of the study imply that during times of heightened uncertainty, exemplified by events such as the COVID-19 pandemic, the feasibility of portfolio diversification for investors might be constrained. Consequently, the amplified linkages between financial assets through both forward and backward connections could potentially compromise financial stability. This research sheds light on the impact of cryptocurrency uncertainty on the broader financial market, particularly during periods of crisis. The findings have implications for investors and policymakers, emphasizing the need for a comprehensive understanding of the interconnectedness of financial assets and the potential risks associated with increased interdependence. By recognizing these dynamics, stakeholders can make informed decisions to enhance financial stability and manage portfolio risk effectively.

Using green and ESG assets to achieve post-COVID-19 environmental sustainability

Article

Full-text available

May 2023

Purpose This research explores the spillovers and portfolio implications for green bonds and environmental, social and governance (ESG) assets in the context of the rapidly expanding trend in green finance investments and the need for a green recovery in the post-COVID-19 era. Design/methodology/approach This study utilizes Diebold and Yilmaz’s (2014) spillover method and portfolio strategies (hedge ratio, optimal weights and hedging effectiveness) for the data starting from February 29, 2012, to March 14, 2022. Findings The study’s findings reveal that the lower volatility spillover is evidenced between the green bonds and ESG stocks during tranquil and turbulent periods (e.g. COVID-19 and Russia-Ukraine War). Furthermore, hedging costs are lower both in normal times and during economic slumps. Investing the bulk of the funds in green bonds makes it possible to achieve maximum hedging effectiveness between the S&P green bond (GB) and the S&P 500 ESG. Practical implications Both investors and policymakers may use these findings to make wise investment and policy choices to achieve post-COVID environmental sustainability. Originality/value Unlike previous research, this is the first to explore the interconnectedness among the major global and country-specific green bonds and ESG assets. The major findings of this study about the lower volatility spillovers and hedging costs between green bonds and ESG assets during the tranquil and turbulent periods may contribute to the post-COVID investment portfolio for environmental sustainability.

Does a Cryptocurrency Comply with Shariah? Empirical Evidence from ARCH-GARCH Economic Model

Article

Full-text available

Mar 2023

The objective of this paper is to analyze the debate about cryptocurrency as money from an Islamic point of view. Money in Islam that is based on urf of custom has also some requirements, such as its stability. Some fatwas in Indonesia regarding the legitimacy of cryptocurrency must be evidenced with an empirical-based. The study used 25 cryptocurrency prices and related information. By employing ARCH and GARCH, the study revealed that cryptocurrency is hugely volatile and, thus, does not fulfill such criterion as money from an Islamic perspective, and is normally used for speculation. Hence, this study suggests that cryptocurrency is still reluctant to be used for a transaction.

Asymmetric connectedness between conventional and Islamic cryptocurrencies: Evidence from good and bad volatility spillovers

Article

Full-text available

Jun 2024

This paper examines the dynamics of the asymmetric volatility spillovers across four major cryptocurrencies comprising nearly 61% of cryptocurrency market capitalization and covering both conventional (Bitcoin and Ethereum) and Islamic (Stellar and Ripple) cryptocurrencies. Using a novel time-varying parameter vector autoregression (TVP-VAR) asymmetric connectedness approach combined with a high frequency (hourly) dataset ranging from 1st June 2018 to 22nd July 2022, we find that (i) good and bad spillovers are time-varying; (ii) bad volatility spillovers are more pronounced than good spillovers; (iii) a strong asymmetry in the volatility spillovers exists in the cryptocurrency market; and (iv) conventional cryptocurrencies dominate Islamic cryptocurrencies. Specifically, Ethereum is the major net transmitter of positive volatility spillovers while Stellar is the main net transmitter of negative volatility spillovers.

How does the mineral resource exploitation sector interact with Islamic and traditional ventures? Insights amidst the impact of green reforms and state-of-the-art technological advancements

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Nov 2024
RESOUR POLICY

Analyzing the interplay between eco-friendly and Islamic digital currencies and green investments

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Nov 2024
TECHNOL FORECAST SOC

Assessing the potential of blockchain technology for Islamic crypto assets

Article

Oct 2023

Purpose The rapid rise of Islamic crypto assets, underpinned by blockchain technology, has introduced a novel dimension to the Islamic financial landscape, raising questions about their potential as safe havens within emerging Islamic economies. However, the opportunities and challenges associated with this phenomenon remain insufficiently explored. In this context, this study aims to empirically investigate the extent to which blockchain technology can establish Islamic crypto assets as safe havens in equity markets within Islamic economies. Design/methodology/approach This study addresses the need for rigorous empirical analysis to understand the dynamics between Islamic crypto assets and stock markets in emerging Islamic economies, focusing on the transmission of volatility. While the evolving nature of the Islamic financial sector demands reliable data, the reliance on the most available data offers insights into the expected future trends in this emerging field. The research specifically focuses on three essential assets in the Islamic financial portfolio: OneGram Coin and X8XToken, both backed by gold and MRHB DeFi, an Islamic DeFi asset lacking gold backing. These crypto assets are compared with corresponding assets in seven stock markets of emerging Islamic economies. Using daily log returns of the Islamic crypto assets from various sources and seven Islamic stock indices. The data covers the period from December 27, 2021, to December 28, 2022, capturing the fluctuations in Islamic stocks and cryptocurrency markets during the post-COVID-19 era. This research uses advanced econometric techniques, including pairwise dynamic correlation and the DCC GARCH model. Findings The findings indicate that Islamic crypto assets exhibit distinct characteristics, with lower volatility and low correlations compared to their conventional counterparts in non-Islamic contexts. This outcome suggests that these Islamic crypto assets could potentially serve as safe havens within Islamic stock markets, offering valuable insights for various stakeholders, including investors, governments and policymakers. Research limitations/implications The findings are based on a specific set of Islamic crypto assets and may vary with a different selection. Market dynamics can also influence the relationships observed. Nevertheless, the outcomes provide valuable insights for investors, policymakers and researchers interested in the intersection of Islamic finance, cryptocurrency and technology. Originality/value In essence, this research not only unveils the potential of Islamic crypto assets as stabilizing forces but also delineates a trajectory for subsequent research endeavours within the realm of emerging Islamic Fintech, elucidating the challenges, opportunities and benefits that lie therein. With a discerning eye on circumventing the pitfalls entrenched within conventional crypto finance, this study contributes to a heightened comprehension of the transformative role that Islamic crypto assets can assume, ultimately enriching the financial resilience of Islamic economies.

Dynamic spillover between green cryptocurrencies and stocks: A portfolio implication

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Sep 2024
Int Rev Econ Finance

Unveiling interconnectedness and risk spillover among cryptocurrencies and other asset classes

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Jul 2024
Global Finance J

An empirical investigation of return spillover and volatility dynamics of Indian sectoral indices

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Jun 2024

To hedge or not to hedge? Cryptocurrencies, gold and oil against stock market risk

Article

Apr 2024
Int Rev Financ Anal

The article aims to determine whether any hedging strategy against stock market risk, performed using instruments popular in the literature (gold, cryptocurrencies and oil), can beat index futures. As a hedging strategy, we understand a pair-wise portfolio consisting of a long position in stocks and a short position in a hedging instrument put together to minimise the portfolio variance. As a benchmark, we analyse optimal and naive hedging strategies with futures contracts. We demonstrate that, regardless of the stock market, the best hedging strategy focused on variance minimisation requires using index futures. Both strategies: the optimisation-based one and the naive one, beat the dynamic strategies utilising the remaining hedging assets. Therefore, from a risk-minimisation point of view, investors have no motivation to implement cryptocurrencies, gold or oil in hedging strategy against stock market risk. The results are robust with respect to hedging against tail risk.

Dynamic volatility among fossil energy, clean energy and major assets: evidence from the novel DCC-GARCH

Article

Full-text available

Apr 2024

The objective of this paper is to assess the dynamic volatility connectedness between fossil energy, clean energy, and major assets i.e., Bonds, Bitcoin, Dollar index, Gold, and Standard and Poor's 500 from September 17, 2014 to October 11, 2022. The main motivation of the study relates to examining the dynamic volatility connectedness mentioned during periods of important events such as the recent coronavirus pandemic and the Russia–Ukraine conflict which has shown the vulnerability of economic and financial assets, energy commodities, and clean energy. The novel Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) approach is employed for the investigation of the sample period mentioned. Empirical analysis reveals that both the total and net volatility connectedness between assets is time-varying. The highest connectedness among the assets is observed with the onset of the coronavirus (COVID-19) pandemic, and it increases with some important international events, such as the Russia–Ukraine conflict, the referendum of Brexit, China–US trade war, and Brexit day. On average, the result shows that 32.8% of the volatility in one asset spills over to all other assets. The DCC-GARCH results also indicate that crude oil, bonds, and Bitcoin act as almost pure volatility transmitters, whereas the Dollar index, gold, and S&P500 act as volatility receivers. On the other hand, clean energy is found neutral to external shocks until the first quarter of 2020 and after that time, it starts to behave as a volatility transmitter. Based on the obtained results, we offer some specific policy implications that are beneficial to the US economy and other countries. Graphical Abstract Dynamic volatility connectedness between fossil energy, clean energy, and major assets (Bonds, Bitcoin, Dollar index, Gold, and Standard and Poor's 500)

Gold-backed cryptocurrencies: A hedging tool against categorical and regional financial stress

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Mar 2024
Global Finance J

Can fiat currencies really hedge Pax gold? Evidence from range-based DCC models

Article

Mar 2024

Purpose This paper assesses the co-movement between Pax gold and six fiat currencies. It also investigates the optimal time-varying hedge ratios in order to examine the properties of Pax gold as a diversifier and hedge asset. Design/methodology/approach This paper examines the volatility spillover between Pax gold and fiat currencies using the framework of wavelet analysis, BEKK-GARCH models and Range DCC-GARCH. Moreover, this paper proposes to use the covariance and variance structure obtained from the new range DCC-GARCH framework to estimate the time-varying optimal hedge ratios, the optimal weighs and the hedging effectiveness. Findings Wavelet coherence method reveals that, at low frequency, large zone of co-movements appears for the pairs Pax gold/EUR, Pax gold/JPY and Pax gold/RUB. Further, the BEKK results show unidirectional (bidirectional) transmission effects between Pax gold and EUR, GBP, JPY and CNY (INR, RUB) fiat currencies. Moreover, the Range DCC results show that the Pax gold and the fiat currency returns are weakly correlated with low coefficients close to zero. Thus, Pax gold seems to serve as a safe haven asset against the systematic risk of fiat currency markets. In addition, the results of optimal weights show that rational investor should invest more in Pax gold and less in fiat currencies. Concerning the hedge ratios results, the findings reveal that the INR (JPY) fiat currency appears to be the most expensive (cheapest) hedge for the Pax-gold market. However, the JPY’s fiat currency appears to be the cheapest one. As for hedging effectiveness results, the authors found that hedging strategies including fiat currencies–Pax gold pairs are most likely to sharply decrease the portfolio’s risk. Practical implications A comprehensive understanding of the relationship between Pax Gold and fiat currencies is crucial for refining portfolio strategies involving cryptocurrencies. This research underscores the significance of grasping volatility transmissions between these currencies, providing valuable insights to guide investors in their decision-making processes. Moreover, it encourages further exploration into the interdependencies of digital currencies. Additionally, this study sheds light on effective contagion risk management, particularly during crises such as Covid-19 and the Russia–Ukraine conflict. It underscores the role of Pax Gold as a safe-haven asset and offers practical guidance for adjusting portfolios across various economic conditions. Ultimately, this research advances our comprehension of Pax Gold’s risk-return profile, positioning it as a potential hedge during periods of uncertainty, thereby contributing to the evolving literature on cryptocurrencies. Originality/value This study’s primary value lies in its pioneering empirical examination of the time-varying correlations and scale dependence between Pax Gold and fiat currencies. It goes beyond by determining optimal time-varying hedge ratios through the innovative Range-DCC-GARCH model, originally introduced by Molnár (2016) and distinguished by its incorporation of both low and high prices. Significantly, this analysis unfolds within the unique context of the Covid-19 pandemic and the Russian–Ukrainian conflict, marking a novel contribution to the field.

Exploring the Dynamics of Equity and Cryptocurrency Markets: Fresh Evidence from the Russia–Ukraine War

Article

Full-text available

Mar 2024
Comput Econ

This study investigates the dynamic connectedness between equity and cryptocurrency markets using the Granger Causality Network and the Wavelet Coherence approaches. Using time series data from July 2021 to January 2023, results indicate that the causality effect increased significantly after the outbreak of geopolitical conflict. Cryptocurrency markets are highly influenced and mutually more connected with equity markets after February 2022. Results also indicate that the causality is more important in European countries and steadily increased as the war progressed. Nevertheless, there is no distinct indication of contagion in China's market. Of greater interest, it is revealed that cryptocurrencies do not offer a "safe haven" advantage during the war, especially in North America and GCC countries. Cryptocurrency-equity markets are fully integrated and moved together for at least 5 months after the beginning of the war. Overall, this paper provides early insight into the use of cryptocurrencies by investors and reveals how equity and cryptocurrency markets co-move within countries. These results are further supported by an alternative Structural Vector Autoregression model. This study provides useful insights to investors, regulators, and policy-makers regarding portfolio management, hedging, and financial market stability.

Diversification, hedging, and safe-haven characteristics of cryptocurrencies: A structural change approach

Article

Mar 2024
Int Rev Financ Anal

Connectedness across Meme Assets and Sectoral Markets: Determinants and Portfolio

Article

Mar 2024
Int Rev Financ Anal

This study examines the dynamic connectedness and risk spillovers between meme coins, meme stocks, and sectoral markets under different investment horizons. Further, we explore the effects of global uncertainty and risk factors on patterns of dynamic connectedness as well as the benefits of portfolio diversification under different investment strategies. Empirical results indicate that the short-, medium-, and long-term connectedness among these markets are time-varying and are highly responsive to external shocks and stress periods, with the short-term spillover dominating both medium-and long-term spillovers. Furthermore, Meme stocks and coins are net receivers of shock, along with the energy, communication services, utilities, and real estate sectors, whereas other sectors are net transmitters. On the contrary, GameStop-GME becomes net shock transmitters in the medium and long run, while Shiba Inu is a net shock transmitter in the long run. We also show that Meme stocks and Meme coins have distinct features and characteristics from the sectoral markets. They are disconnected and minimally affected by the fluctuations in the sectoral market. Finally, empirical findings show that global risk factors reduce dynamic connectedness across time horizons. These results have several implications for investors, portfolio managers, and policymakers regarding investment strategies, asset allocation, and risk management.

Epistemology of Fatwas on Digital Transaction in Indonesia

Article

Full-text available

Dec 2023

The shift from conventional business transactions to digital business transactions, especially for the Muslim community in Indonesia, necessitates a fast and reactive response from current laws. The theoretical argument that has been developed thus far is that the fatwa is the most appropriate legal tool for Muslim communities to respond to the rapid development of digital business. Nevertheless, do the existing fatwas fulfill legal needs as expected in this era of digital transactions? Hence, this paper discusses digital transaction fatwas within the framework of Islamic legal epistemology, especially fatwas from the National Shariah Council–Indonesian Ulama Council. The research method uses normative juridical with a conceptual and historical-uṣūliyah approach. This research finds that the contemporary fatwa epistemology of the National Shariah Council–Indonesian Ulama Council in terms of digital transactions employs istiṣlāhī arguments. This is shown by the proposition that fiqh rules are more dominant than textual ones. Moreover, the arguments in the fatwa of the National Shariah Council–Indonesian Ulama Council provide signs of benefit as the estuary of maqāṣid syarī'ah. The consistency of the use of legal methodology utilized by the National Shariah Council–Indonesian Ulama Council in fatwas on digital transactions is shown in the structure and utilization of al-nuṣūṣ al-shariah arguments, the opinions of ulama, and the rules of fiqh, which are expanded from the five rules of fiqh into eight rules. These fatwas are reliable and valid in terms of dictum and method, thus supporting the development of the current digital transactions.

Volatility spillovers among leading cryptocurrencies and US energy and technology companies

Article

Full-text available

Feb 2024

This study investigates volatility spillovers and network connectedness among four cryptocurrencies (Bitcoin, Ethereum, Tether, and BNB coin), four energy companies (Exxon Mobil, Chevron, ConocoPhillips, and Nextera Energy), and four mega-technology companies (Apple, Microsoft, Alphabet, and Amazon) in the US. We analyze data for the period November 15, 2017–October 28, 2022 using methodologies in Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) and Baruník and Křehlík (J Financ Economet 16(2):271–296 2018). Our analysis shows the COVID-19 pandemic amplified volatility spillovers, thereby intensifying the impact of financial contagion between markets. This finding indicates the impact of the pandemic on the US economy heightened risk transmission across markets. Moreover, we show that Bitcoin, Ethereum, Chevron, ConocoPhilips, Apple, and Microsoft are net volatility transmitters, while Tether, BNB, Exxon Mobil, Nextera Energy, Alphabet, and Amazon are net receivers Our results suggest that short-term volatility spillovers outweigh medium- and long-term spillovers, and that investors should be more concerned about short-term repercussions because they do not have enough time to act quickly to protect themselves from market risks when the US market is affected. Furthermore, in contrast to short-term dynamics, longer term patterns display superior hedging efficiency. The net-pairwise directional spillovers show that Alphabet and Amazon are the highest shock transmitters to other companies. The findings in this study have implications for both investors and policymakers.

Epistemology of Fatwas on Digital Transaction in Indonesia

Article

Full-text available

Feb 2024

Akmal Bashori

jhi-2102-15-12-2023-2-final (1)

Article

Full-text available

Feb 2024

Akmal Bashori

Spillovers and hedging effectiveness between oil and US equity sectors: Evidence from the COVID pre- and post-vaccination phases

Article

Dec 2023
Res Int Bus Finance

We examine the return and volatility transmission between oil and US equity sectors during three periods: the pre-COVID-19 phase, COVID-19 pre-vaccination phase, and COVID-19 post-vaccination phase. We show that the return and volatility spillovers between oil and US equity sectors vary across these three phases. The highest return connectedness is observed during the post-vaccination phase. The volatility spillover is highest from the majority of sectors to oil market in the COVID-19 pre-vaccination phase. The volatility transmission from oil to US equities during COVID-19 is weak. Moreover, our optimal weights estimations suggest that investors should decrease their exposures in US equities for the portfolio of oil-equity sectors in the COVID-19 post-vaccination phase. Finally, hedging cost is lowest, and hedging effectiveness is highest during the post-vaccination phase. Our findings provide valuable insights to portfolio managers and investors regarding portfolio diversification, hedging, and forecasting during health crises and subsequent recovery phases.

Tail-risk connectedness between sukuk and conventional bond markets and their determinants: Evidence from a country-level analysis

Article

Dec 2023

The resilience of Shariah-compliant investments: Probing the static and dynamic connectedness between gold-backed cryptocurrencies and GCC equity markets

Article

Full-text available

Dec 2023
Int Rev Financ Anal

Islamic versus conventional financial market: a meta-literature review of spillover effects

Article

Oct 2023

Purpose This study comprehensively aims to review the key influential and intellectual aspects of spillovers between Islamic and conventional financial markets. Design/methodology/approach The study uses the bibliometric and content analysis methods using the VOSviewer software to analyse 52 academic documents derived from the Web of Sciences (WoS) between 2015 and June 2022. Findings The results demonstrate the influential aspects of spillovers between Islamic and conventional financial markets, including the leading authors, journals, countries and institutions and the intellectual aspects of literature. These aspects are synthesised into four main streams: research between stock indexes; studies between stock indexes, oil and precious metal; works between Sukuk, bond and indexes; and empirical studies review. The authors also propose future research directions in spillovers between Islamic and conventional financial markets. Research limitations/implications Our study is subject to several limitations. Firstly, the authors only used the WoS database. Secondly, the study only includes papers and reviews written in English from the WoS. This study assists academic scholars, practitioners and regulatory bodies in further exploring the suggested issues in future studies and improving and predicting economic and financial stability. Originality/value To the best of the authors’ knowledge, no extant empirical studies have been conducted in this area of research interest.

Dynamic connectedness, spillover, and optimal hedging strategy among FinTech, Sukuk, and Islamic equity markets

Article

Oct 2023
Global Finance J

Time-frequency dependency between stock market volatility, and Islamic gold-backed and conventional cryptocurrencies

Article

Full-text available

Apr 2023

We extend the Shariah-compliant digital assets and Islamic Fintech literature through exploring the time-frequency associations between the volatility index (VIX) and cryptocurrencies (both Islamic and traditional). Employing wavelet-based technique, we find that Islamic cryptocurrencies demonstrate low or no coherency with stock market volatility compared to traditional cryptocurrencies (except Tether) during the whole time and frequency bands, highlighting the hedging capabilities of Islamic cryptocurrencies. Tether also serves the same against VIX, as there is a low or favorable link between these variables. Finally, our findings would be prolific to digital currency traders and investors in designing the portfolio strategies.

Were CEO pay cuts during the COVID-19 pandemic merely symbolic? Shareholders' reaction and outrage

Article

Mar 2023
Pac Basin Finance J

Score-driven cryptocurrency and equity portfolios

Article

Full-text available

Feb 2023
APPL ECON

This paper discusses whether the Bitcoin exchange-traded fund (ETF), which tracks the value of Bitcoin, improves equity portfolios, by using a robust portfolio performance analysis. The equity portfolio is represented by an ETF which tracks the Standard & Poor's 500. We use data for a turbulent investment period within the coronavirus pandemic, to study the diversification benefits of Bitcoin. We compare the performances of diverse portfolios composed of both ETFs, which include 40 classical dynamic volatility model-based portfolios and 900 score-driven portfolios. For the score-driven portfolios, dynamic association is modelled by score-driven Clayton, rotated Clayton, Gumbel, rotated Gumbel, and Student's t copulas. We compare portfolio strategies using the model confidence set test. We find that score-driven portfolios outperform classical volatility model-based portfolios and the equity portfolio. Our results may provide suggestions for cryptocurrency investors on portfolio optimization, and may also have policy implications for regulators and policymakers.

Directional spillover effects and time-frequency nexus between oil, gold and stock markets: Evidence from pre and during COVID-19 outbreak

Article

Full-text available

Mar 2021
Int Rev Financ Anal

The Covid-19 crisis has been spread rapidly throughout the world so far. However, how deep and long the turbulence would depend on the success of solutions taken to deter the spread of Covid-19, the impacts of government policies may be prominent to alleviate the current crisis. In this article, we investigate the spillover effects and time-frequency connectedness between S&P 500, crude oil prices, and gold asset using both the spillover index of Diebold and Yilmaz (2012) and the wavelet coherence to evaluate whether the time-varying dynamic return spillover index exhibited the intensity and direction of transmission during the Covid-19 outbreak. Overall, the present results shed light on that in comparison with the pre-Covid-19 period, and the return transmissions are more apparent during the Covid-19 crisis. More importantly, there exist significant dependent patterns about the information spillovers among the crude oil, S&P 500, and gold markets might provide significant implications for portfolio managers, investors, and government agencies.

Is Bitcoin really more than a diversifier? A pre-and post-COVID-19 analysis

Article

Full-text available

Mar 2021

We examine whether Bitcoin can act as a safe haven against adverse movements of stock and bond assets in five major economies during the COVID-19 bear market. The empirical analyses are conducted using a Bayesian panel VAR method that captures potential interaction and heterogeneity across country/region-segmented markets. We find that Bitcoin in each given economy contributes to diversification benefits and/or risk mitigation both within and across borders, while its role against traditional assets varies. We also show that the COVID-19 outbreak alters the role of Bitcoin in our target segmented markets except for the US.

Emerging Market Portfolios and Islamic Financial Markets: Diversification Benefits and Safe Havens

Article

Full-text available

Feb 2021

We examine the relationship between Islamic and conventional stock market returns to see if Islamic financial markets provide portfolio diversification benefits and safe havens during turbulent times. Using daily data from January 1996 through September 2020 we consider conventional emerging stock market returns and some Islamic stock market returns and examine their interactions using causality-in-variance, dynamic conditional correlations, optimal hedge ratios, and causality-in-risk tests. Causality-in-variance test results show causality between Islamic stock returns and all emerging stock returns which indicates Islamic markets provide limited safe havens. Results from both time-varying conditional correlations and the hedge ratios show that there are positive and significant correlations between emerging stock markets and Dow Jones Islamic Market Index, which implies limited portfolio diversification benefits afforded by Islamic stock markets.

Realized volatility transmission within Islamic stock markets: A multivariate HAR-GARCH-type with nearest neighbor truncation estimator

Article

Full-text available

Oct 2020

Using the nearest neighbor truncation (NNT) approach, this study investigates the realized volatility transmission between the Malaysian Islamic market with various global sectoral Islamic stock markets by extending the heterogeneous autoregressive (HAR) with GARCH, asymmetric effects and jump-robust volatility estimator established in a multivariate setting. The multivariate HAR-GARCH model is capable to capture the persistence and time-varying volatility of realized volatility while NNT approach allows for an asymptotic limit theory in the presence of jumps. Using intraday data, the findings suggest the daily realized volatilities of the Islamic equities rely significantly on their own short-, mid- and long-term volatility components. Besides, there is an evidence of volatility spillover in majority of the pairwise but with low magnitude. The findings also confirm the vital role of conditional heteroscedasticity in the volatility series in explaining the measured volatility transmission of the Islamic stock indices. Hence, this study provides useful insight to understand the portfolio risk of Shariah-compliant equities in making better-informed portfolio allocation.

Discovering interlinkages between major cryptocurrencies using high-frequency data: new evidence from COVID-19 pandemic

Article

Full-text available

Nov 2020

Through the application of the VAR-AGARCH model to intra-day data for three cryptocurrencies (Bitcoin, Ethereum, and Litecoin), this study examines the return and volatility spillover between these cryptocurrencies during the pre-COVID-19 period and the COVID-19 period. We also estimate the optimal weights, hedge ratios, and hedging effectiveness during both sample periods. We find that the return spillovers vary across the two periods for the Bitcoin–Ethereum, Bitcoin–Litecoin, and Ethereum–Litecoin pairs. However, the volatility transmissions are found to be different during the two sample periods for the Bitcoin–Ethereum and Bitcoin–Litecoin pairs. The constant conditional correlations between all pairs of cryptocurrencies are observed to be higher during the COVID-19 period compared to the pre-COVID-19 period. Based on optimal weights, investors are advised to decrease their investments (a) in Bitcoin for the portfolios of Bitcoin/Ethereum and Bitcoin/Litecoin and (b) in Ethereum for the portfolios of Ethereum/Litecoin during the COVID-19 period. All hedge ratios are found to be higher during the COVID-19 period, implying a higher hedging cost compared to the pre-COVID-19 period. Last, the hedging effectiveness is higher during the COVID-19 period compared to the pre-COVID-19 period. Overall, these findings provide useful information to portfolio managers and policymakers regarding portfolio diversification, hedging, forecasting, and risk management.

Any port in a storm: Cryptocurrency safe-havens during the COVID-19 pandemic

Article

Full-text available

Jul 2020
ECON LETT

Controlling for the polarity and subjectivity of social media data based on the development of the COVID-19 outbreak, we analyse the relationships between the largest cryptocurrencies and such time-varying realisation as to the scale of the economic shock centralised within the rapidly-escalating pandemic. We find evidence of significant growth in both returns and volumes traded, indicating that large cryptocurrencies acted as a store of value during this period of exceptional financial market stress. Further, cryptocurrency returns are found to be significantly influenced by negative sentiment relating to COVID-19. While not only providing diversification benefits for investors, results suggest that these digital assets acted as a safe-haven similar to that of precious metals during historic crises.

Are Cryptocurrencies a Safe Haven for Equity Markets? An International Perspective from the COVID-19 Pandemic

Article

Full-text available

Jun 2020
Res Int Bus Finance

The COVID-19 pandemic provided the first widespread bear market conditions since the inception of cryptocurrencies. We test the widely mooted safe haven properties of Bitcoin, Ethereum and Tether from the perspective of international equity index investors. Bitcoin and Ethereum are not a safe haven for the majority of international equity markets examined, with their inclusion adding to portfolio downside risk. Only investors in the Chinese CSI 300 index realized modest downside risk benefits (contingent on very limited allocations to Bitcoin or Ethereum). As Tether successfully maintained its peg to the US dollar during the COVID-19 turmoil, it acted as a safe haven investment for all of the international indices examined. We caveat the latter findings with a warning that Tether's dollar peg has not always been maintained, with evidence of impaired downside risk hedging properties earlier in our sample.

Co-movement of COVID-19 and Bitcoin: Evidence from wavelet coherence analysis

Article

Full-text available

Jun 2020

We apply wavelet methods to daily data of COVID-19 world deaths and daily Bitcoin prices from 31th December 2019 to 29th April 2020. We find, especially for the period post April 5, that levels of COVID-19 caused a rise in Bitcoin prices. We contribute to the fast-growing body of work on the financial impacts of COVID-19, as well as to ongoing consideration of whether Bitcoin is a safe haven investment. Our results should be of great interest to both scholars and policy makers, as well as investment professionals interested in the financial implications of both COVID-19 and cryptocurrencies.

The contagion effects of the COVID-19 pandemic: Evidence from Gold and Cryptocurrencies

Article

Full-text available

May 2020

At the beginning of the 2020 global COVID-2019 pandemic, Chinese financial markets acted as the epicentre of both physical and financial contagion. Our results indicate that a number of characteristics expected during a ”flight to safety” were present during the period analysed. The volatility relationship between the main Chinese stock markets and Bitcoin evolved significantly during this period of enormous financial stress. We provide a number of observations as to why this situation occurred. Such dynamic correlations during periods of stress present further evidence to cautiously support the validity of the development of this new financial product within mainstream portfolio design through the diversification benefits provided.

Are stablecoins truly diversifiers, hedges, or safe havens against traditional cryptocurrencies as their name suggests?

Article

Full-text available

May 2020
Res Int Bus Finance

Malaysian Muslim Investors’ Behaviour Towards the Block chain-based Bitcoin Cryptocurrency market

Article

Full-text available

Feb 2020

Purpose – This study aims to examine the factors that could increase the investment in Bitcoin market among Malaysian Muslim communities. Design/methodology/approach – The study used a survey questionnaire to collect data for a sample of 200 Muslim respondents in Malaysia. Subsequently, the collected data was analysed using Structural Equation Modelling (SEM) as well as basic descriptive statistics and one sample test. Findings – The findings showed that compatibility, awareness and facilitating conditions have a significant impact on Malaysian Muslim communities’ investment in Bitcoin market. Originality/value – It is worth emphasizing that this is one of the earliest studies that examine the Muslim communities’ perception and willingness to invest in Bitcoin market. Hence, it is expected be one of the foundations for the future studies in this area.

The requirements of cryptocurrency for money, an Islamic view

Article

Full-text available

Jan 2020

This research aims to evaluate the suitability of cryptocurrency as money from the Islamic perspective. Money, in the Islamic perspective, has specific characteristics and requirements, such as stability and is based on assets. Cryptocurrency may not fulfil this as it has queries as money from the Islamic perspective. The research method applied data of 23 cryptocurrency prices and related information. The result shows that cryptocurrency is hugely volatile and has limits to being called 'money,' as it is limited and used for speculation, which is prohibited in Islam. The research implies that Muslims would be reluctant to use cryptocurrency as money, as a currency of transaction. This reason raise an expectation that the cryptocurrency will not develop rapidly in Muslim countries.

Crypto-currency Tide and Islamic Finance Development: Any Issue?

Chapter

Full-text available

Oct 2019

Downside risk in Dow Jones Islamic equity indices: Precious metals and portfolio diversification before and after the COVID-19 bear market

Article

Jul 2021
Res Int Bus Finance

Besides great turmoil in financial markets, the COVID-19 pandemic also disrupted the global supply chain, putting the precious metal market into great uncertainty. In this study, we revisit the diversifying role of precious metals-gold, silver, and platinum-for six Dow Jones Islamic (DJI) equity index portfolios using a battery of tests: dynamic conditional correlations (DCCs), four-moment modified value at risk (VaR) and conditional VaR, and global minimum-variance (GMV) portfolio approach. Our empirical results exhibit drastically increased DCCs between sample assets during the COVID period; however, pairing gold with any of the DJI equity indices (except for the Asia-Pacific region) decreases the downside risk of these portfolios. Other precious metals (silver and platinum) do not provide such benefits. Furthermore, we find that a higher allocation of wealth in DJI Japanese equities and gold is required to achieve a GMV portfolio in the post-COVID-19 era, implying higher transaction (hedging) costs to rebalance portfolios (weights) accordingly. Our out-of-sample tests examining the global financial crisis, European debt crisis, and extended sample (2000-2020) periods yield similar findings as gold glitters across all market conditions. Overall, our findings provide notable practical implications for both domestic and international investors.

Impact of COVID-19 Pandemic on Stock Markets: Conventional vs. Islamic Indices using Wavelet-based Multi-timescales Analysis

Article

Jul 2021
N Am J Econ Finance

We empirically explore the effect of the COVID-19 pandemic on Islamic and conventional stock markets from a global perspective. We also explore the co-movement between Islamic and conventional stock markets. Two comparable pairs of conventional and Islamic stock indices - Dow Jones Index and FTSE Index are considered in this study. Employing Wavelet-based multi-timescales techniques on the daily data from 21st January to 27th November 2020, our findings indicate that the pandemic creates identical volatility in both stock markets. Our findings further suggest that both markets are strongly associated and tend to co-move highly during our sample period, rebutting the decoupling hypothesis of the Islamic stock market from the conventional market. However, the Shariah screening process fails to provide immunity to Islamic stock markets against financial crises. Our findings suggest that investors should be aware that Islamic stocks' conservative features do not present a superior investment alternative, especially in economic turmoil.

Exploring the hedge and safe haven properties of cryptocurrency in policy uncertainty

Article

Jul 2021
Finance Res Lett

We analyze the cryptocurrency policy uncertainty (UCRY Policy) effect on gold, Bitcoin, the US dollar, DJ Islamic Index, Sukuk, and WTI returns. Using Ordinary Least Square, Quantile regression, and Quantile-on-Quantile regression approaches, we find that Bitcoin, the US dollar, and WTI returns are negatively impacted by UCRY Policy during the bearish and bullish states, suggesting their failure to act as a hedge or safe-haven asset. Conversely, UCRY Policy positively impacts gold, DJ Islamic Index, and Sukuk returns, highlighting their potential to function as a hedge or safe-haven asset. Gold serves the same role during highly uncertain times.

Risk transmissions between sectoral Islamic and conventional stock markets during COVID-19 pandemic: What matters more between actual COVID-19 occurrence and speculative and sentiment factors?

Article

Jun 2021

Being the health pandemic with the highest impact on the global financial market, the recent COVID-19 pandemic has led to significant risk transmissions across stock markets. Although an increasing number of studies have examined the effects of the pandemic on financial markets, we provide novel insights into the volatility connectedness between conventional and Islamic stock markets. First, the analysis is conducted at the sectoral level, considering nine sectors for each category. Second, a greater novelty is applied by determining if the actual COVID-19 occurrence or speculations or sentiments raised by it is responsible for the connectedness. Summarily, findings show that markets are strongly connected. In addition, the Technology and Utilities sectors of both stock market types, and the Oil and Gas conventional stocks are the net receivers of volatility shocks. On average, however, Islamic markets tend to be more immune to the pandemic than conventional markets. Finally, both causal factors considered significantly affect the connectedness measures, although the effect is heterogeneous and stronger for the speculative/sentiment indicators. These findings provide appropriate policy clues for both investors and policy makers.

COVID-19 and time-frequency connectedness between green and conventional financial markets

Article

Jun 2021
Global Finance J

Against the backdrop of the exponentially growing trend in green finance investments and the calls for green recovery in the post-COVID world, this study presents the time-frequency connectedness between green and conventional financial markets by using the spillover models of Diebold and Yilmaz (2012) and Baruník and Křehlík (2018). Covering a sample period from January 01, 2008, to July 31, 2020, we aim to explore the dynamics of connectedness between conventional and green investments in fixed income, equity, and energy markets. Additionally, we determine the role of market-wide uncertainty in altering the connectedness structure by performing a subsample analysis for the ongoing COVID-19 pandemic crisis period. Our results show that competing energy investments are not connected, and there is only one-way spillovers from the conventional bonds in the fixed-income investments. Additionally, we observe a low (high) intergroup connectedness for conventional (green) investments. Moreover, the frequency-based analysis shows that connectedness between these competing markets is more pronounced during the short-run. The subsample analysis for the pandemic crisis period shows similar results except for the disconnection between bond markets in the short-run frequency. Our time-varying analysis shows peaks and troughs in the connectedness between climate-friendly and conventional investments that suggest different global events such as the Eurozone Debt Crisis and Shale Oil Revolution drives the association between alternate investments. Similarly, we observe an enhanced connectedness during the recent COVID-19 period, suggesting that financial stability would be a significant factor in determining the smooth transition to green investments.

The Relationship between Yield Curve Components and Equity Sectorial Indices: Evidence from China

Article

Jun 2021
Pac Basin Finance J

This paper examines the static and dynamic connectedness (returns and volatility) between the components of the sovereign yield curve (level, slope, curvature) and sectorial equity indices in China. We document a strong connection between these factors, particularly during three periods: the August 2011 stock market crash, the 2015 Chinese stock market crash and the 2018 US-China trade war. Our results show that the level component of the yield curve is a net transmitter of return spillovers, whereas the curvature component of the yield curve is a net transmitter of volatility spillovers. These findings may be useful for portfolio managers and policymakers making decisions regarding portfolio allocations, risk management, and monetary policy.

Quantile connectedness between Sukuk bonds and the impact of COVID-19

Article

Jun 2021

The purpose of this study is to investigate the return connectedness in the median, left, and right tail, using the novel methodology of quantile-based connectedness proposed by Ando et al. (2018 Ando, T., M. Greenwood-Nimmo, and Y. Shin. 2018. Quantile Connectedness: Modelling Tail Behaviour in the Topology of Financial Networks. Available at SSRN 3164772. https://doi.org/10.2139/ssrn.3164772 [Google Scholar]). We use daily data covering the period from 1 January 2013 to 27 October 2020, which includes different financial crises occurring in GCC, Turkey, Malaysia, and Indonesia. Furthermore, analysing the dynamic connectedness, the Sukuk market was significantly influenced by the COVID-19 pandemic. Our findings reveal that the spillover structures in both upper and lower tails differ from those observed in the middle quantile. Finally, we find that Bahrain, Malaysia, Oman, and Qatar transmitted more spillovers than they admitted during the COVID-19 outbreak. These findings offer vital implications for regulators and policymakers, investors, traders, and portfolio managers regarding whether diversification across Sukuk indices is achievable during turbulent periods like COVID-19.

Risk transmission from the COVID-19 to metals and energy markets

Article

May 2021
RESOUR POLICY

Imran Yousaf

We examine the risk transmission from the COVID-19 to metal (precious and industrial) and energy markets using the BEKK-MGARCH model. The findings reveal the significant and negative volatility transmission from the COVID-19 to gold, palladium, and brent oil markets, suggesting the safe-haven properties of these markets. The COVID-19 risk is not transmitted to the industrial metal market, whereas the rise in COVID-19 volatility leads to an increase in WTI oil market volatility. These results provide useful insights to investors and policymakers regarding risk management, asset pricing, and financial market stability during the COVID-19 pandemic.

An artificial neural network augmented GARCH model for Islamic stock market volatility: Do asymmetry and long memory matter?

Article

May 2021
Int J Islam Middle E Finance Manag

Purpose The purpose of this study is to investigate the volatility and forecast accuracy of the Islamic stock market for the period 1999–2017. This period is characterized by the occurrence of several economic and political events such as the September 11, 2001, terrorist attack and the 2007–2008 global financial crisis. Design/methodology/approach This study constructs a new hybrid generalized autoregressive conditional heteroskedasticity (GARCH)-type model based on an artificial neural network (ANN). This model is applied to the daily Dow Jones Islamic Market World Index during the period June 1999–January 2017. Findings The in-sample results show that the volatility of the Islamic stock market can be better described by the fractionally integrated asymmetric power ARCH (FIAPARCH) approach that takes into account asymmetry and long memory features. Considering the out-of-sample analysis, this paper has applied a hybrid forecasting model, which combines the FIAPARCH approach and the ANN. Empirical results reveal that the proposed hybrid model (FIAPARCH-ANN) outperforms all other single models such as GARCH, fractional integrated GARCH and FIAPARCH in terms of all performance criteria used in the study. Practical implications The results have some implications for Islamic investors, portfolio managers and policymakers. These implications are related to the optimal portfolio diversification decision, the hedging strategy choice and the risk management analysis. Originality/value The paper develops a new framework that combines an ANN and FIAPARCH model that introduces two important features of time series, namely, asymmetry and long memory.

Safe havens in Islamic financial markets: COVID-19 versus GFC

Article

Apr 2021
Global Finance J

Using a bivariate dynamic conditional correlation (DCC) generalized autoregressive conditional heteroskedasticity (GARCH) model, this study compares the safe-haven properties of various assets against the major Gulf Cooperation Council (GCC) stock indexes during two periods of financial turmoil, the COVID-19 pandemic and the 2008 Global Financial Crisis (GFC). Sovereign bonds offered the highest hedging benefits under both crises. The traditional safe assets, gold and silver, which were reasonably productive under the GFC, have been less so during the pandemic. The Japanese yen emerged as a very safe choice for investors holding GCC stock indexes. Both sector indexes and stock indexes failed to safeguard investors most of the time during each crisis.

Asymmetric volatility spillover among Chinese sectors during COVID-19

Article

Apr 2021
Int Rev Financ Anal

Inter-sectoral volatility linkages in the Chinese stock market are understudied, especially asymmetries in realized volatility connectedness, accounting for the catastrophic event associated with the COVID-19 outbreak. In this paper, we examine the asymmetric volatility spillover among Chinese stock market sectors during the COVID-19 pandemic using 1-min data from January 2, 2019 to September 30, 2020. In doing so, we build networks of generalized forecast error variances by decomposition of a vector autoregressive model, controlling for overall market movements. Our results show evidence of the asymmetric impact of good and bad volatilities, which are found to be time-varying and substantially intense during the COVID-19 period. Notably, bad volatility spillover shocks dominate good volatility spillover shocks. The findings are useful for Chinese investors and portfolio managers constructing risk hedging portfolios across sectors and for Chinese policymakers monitoring and crafting stimulating policies for the stock market at the sectoral level.

Islamic equity markets versus their conventional counterparts in the COVID‐19 age: Reaction, resilience, and recovery

Article

Mar 2021
Int Rev Finance

We undertake a comparative examination of Islamic equity markets and their conventional counterparts during the COVID‐19 pandemic via maximum drawdown‐based risk measures. The two‐digit drawdown throughout the underlying sectors signifies the indiscriminate impact of the pandemic. It appears that most of the Islamic sectors experience relatively lower drawdown as well as faster recovery than their non‐Islamic counterparts. During the period, Islamic markets outperformed their counterparts. Islamic markets also hold healthier Calmar ratios while the emerging markets retain relatively higher metrics.

The effects of a “black swan” event (COVID-19) on herding behavior in cryptocurrency markets

Article

Mar 2021
J Int Financ Market Inst Money

This paper analyses herding in cryptocurrency markets in the time of the COVID-19 pandemic. We employ a combination of quantitative methods to hourly prices of the four most traded cryptocurrency markets - USD, EUR, JPY and KRW - for the period from 1st January 2019 to 13th March 2020. While there are several strong theoretical reasons to observe the “black swan” effect on cryptocurrency herding, our results suggest that COVID-19 does not amplify herding in cryptocurrency markets. In all markets studied, herding remains contingent on up or down markets days, but does not get stronger during the COVID-19. These results are important for cryptocurrency investors and regulators to enhance their understanding of cryptocurrency markets and the financial effects of the COVID-19 pandemic.

Corporate immunity to the COVID-19 pandemic

Article

Mar 2021
J FINANC ECON

We evaluate the connection between corporate characteristics and the reaction of stock returns to COVID-19 cases using data on more than 6,700 firms across 61 economies. The pandemic-induced drop in stock returns was milder among firms with stronger pre-2020 finances (more cash and undrawn credit, less total and short-term debt, and larger profits), less exposure to COVID-19 through global supply chains and customer locations, more corporate social responsibility activities, and less entrenched executives. Furthermore, the stock returns of firms controlled by families (especially through direct holdings and with non-family managers), large corporations, and governments performed better, and those with greater ownership by hedge funds and other asset management companies performed worse. Stock markets positively price small amounts of managerial ownership but negatively price high levels of managerial ownership during the pandemic.

Determinants of Spillovers between Islamic and Conventional Financial Markets: Exploring the Safe Haven Assets during the COVID-19 Pandemic

Article

Feb 2021

We analyse the impact of the COVID-19 pandemic on the spillovers between conventional and Islamic stock and bond markets. We further analyse comparatively whether gold, oil, Bitcoin prices, and VIX and EPU indexes affect the relationships between these markets during the COVID-19 pandemic outbreak. The results show that the Islamic bonds (Sukuk) demonstrate safe haven properties during this pandemic crisis, while the spillovers between conventional and Islamic stock markets become stronger during the pandemic outbreak. COVID-19, Oil and gold are strong predictors of the conventional-Islamic markets spillovers, while Bitcoin is not a significant determinant of these relationships.

Dynamic return and volatility connectedness between commodities and Islamic stock market indices

Article

Feb 2021
RESOUR POLICY

This study focuses on the dynamic connectedness between returns and volatilities of commodities and Islamic developed and emerging market indices using daily date from August 30, 2007 to June 30, 2020. We employed the Diebold and Yilmaz (2014) connectedness index based on the forecast error variance decomposition from vector autoregression (VAR) framework. First, we used a static analysis to calculate the total return and volatility connectedness. Second, we opted for a dynamic analysis to evaluate both the net directional and net pairwise directional connectedness for commodities and Islamic stock markets in the total period. Finally, we perform a sub-sample analysis, with networks, nodes and edges after the outbreak of COVID-19 to highlight how this earlier outbreak has changed the network structure between commodities and Islamic indices. Generally, results show that commodities indices exhibits the highest source of shocks to Islamic stock market whatever the period. Additionally, the rolling analysis of return and volatility spillover shows that the degree of connectedness varies over time, as there is a strong spillover transmission especially after the COVID-19 pandemic. Thus, Islamic stock market appears as a net recipient rather than a transmitter of spillovers.

Safe haven in GFC versus COVID-19: 100 turbulent days in the financial markets

Article

Jan 2021

In this paper, we use a bivariate Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model within the world's dominant financial asset classes— represented by sovereign bonds, commodities, and major exchange rates—to characterize the correlation within the major asset classes among the Global Financial Crisis (GFC) and COVID-19’s 100 days. Our results specify a noteworthy degradation of co-relationship within the asset classes dominant in COVID-19 compared to the GFC, especially when the VIX was at its peak, indicating massive fear among investors. We also find that gold, U.S., UK, and German sovereign bonds are a safe option for investors.

Islamic stock-sukuk indexes' correlations: does financial uncertainty matter?

Article

Jan 2021
Int J Emerg Market

Purpose This study examines co-movements between global Islamic index and heterogeneous rated/maturity sukuk. It tests the impact of financial uncertainty on these movements. Design/methodology/approach Firstly, we conduct a bivariate wavelet analysis to assess the co-movements between stocks and sukuk indexes. Secondly, we use General dynamic factor model and stochastic volatility to construct financial uncertainty index from Islamic stock indexes. Finally, we run regression analysis to determine the impact of uncertainty on the obtained correlations. Findings Our results suggest the absence of flight to quality phenomenon since correlations are positive especially at a short investment horizon. There is evidence of contagion phenomena across assets. Financial uncertainty may be considered as a determinant of stock-sukuk co-movements. Our results show that a rise in financial uncertainty induces correlation to move in the opposite direction in the short term, (exception for correlation with AA-Rated sukuk). However, the sign of stock market uncertainty becomes positive in the long term, which leads sukuk and stocks to move in the same direction (exception for 1–3 Year and AA Rated sukuk). Practical implications Investors may combine sukuk with 1–3 Year maturity and AA Rated when considering long holding periods. Further, all sukuk categories provide diversification benefit in time high financial uncertainty expectation for AA Rated sukuk when considering short holding periods. Originality/value To the best of our best knowledge, our study is the first investigation of the impact of financial uncertainty on Stock-sukuk co-movements and provides recommendation considering sukuk with different characteristics.

Islamic stock-sukuk indexes' correlations: does financial uncertainty matter?

Article

Jan 2021
Int J Emerg Market

Linkages between Stock and Cryptocurrency Markets during the Covid-19 Outbreak: An Intraday Analysis

Article

Jan 2021

This study explores the return and volatility spillovers between the S&P 500 and cryptocurrencies (Litecoin, Bitcoin, and Ethereum) during the pre-COVID-19 period and the COVID-19 period using the VAR- BEKK-AGARCH model on hourly data. Furthermore, this study also quantifies the optimal portfolio weights and hedge ratios during both sample periods. The findings of study show that the return and volatility spillovers between US stock and cryptocurrency markets are not significant during the pre-COVID-19. However, the study finds the unidirectional return transmission from the S&P 500 to all cryptocurrencies during the COVID-19. During the COVID-19, the volatility spillover is unidirectional from the S&P 500 to Litecoin, whereas volatility transmissions are not significant for the pairs of S&P 500- Bitcoin and S&P 500-Ethereum. Based on optimal weights, the portfolio managers are recommended to slightly decrease their investments in the S&P 500 for the portfolios of S&P 500/BTC, S&P 500/ETH, and S&P 500/LTC during the COVID-19 period. Finally, during the COVID-19 period, all hedge ratios were found to be higher, implying higher hedging costs during COVID-19 period compared to pre-COVID-19 period. Our research offers valuable insights to the fund managers, investors, and policymakers regarding diversification opportunities, hedging, optimal asset allocation, and risk management.

The unprecedented stock market reaction to COVID-19

Article

Dec 2020

No previous infectious disease outbreak, including the Spanish Flu, has affected the stock market as forcefully as the COVID-19 pandemic. In fact, previous pandemics left only mild traces on the U.S. stock market. We use text-based methods to develop these points with respect to large daily stock market moves back to 1900 and with respect to overall stock market volatility back to 1985. We also evaluate potential explanations for the unprecedented stock market reaction to the COVID-19 pandemic. The evidence we amass suggests that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U.S. stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918–1919, 1957–1958, and 1968.

Trust and stock market volatility during the COVID-19 crisis

Article

Dec 2020

We investigate if trust affects global stock market volatility during the COVID-19 pandemic. Using a sample of 47 national stock markets, we find the stock markets’ volatility to be significantly lower in high-trust countries (in reaction to COVID-19 case announcements). Both trust in fellow citizens as well as in the countries’ governments are of significant importance.

Are Bitcoin and Ethereum safe-havens for stocks during the COVID-19 pandemic?

Article

Oct 2020

Utilizing the WHO COVID-19 pandemic statement, we test Bitcoin and Ethereum as safe-havens for stocks. We find that the two largest cryptocurrencies are suitable as short-term safe-havens. The DCC and cDCC results show that their daily returns tend to correlate with S&P500 return negatively during the pandemic. The regression results also robustly support the safe-haven features and uncover that Ethereum is possibly a better safe-haven than Bitcoin. However, we note that both coins exhibit high volatilities. Before (during) the pandemic daily volatilities of Bitcoin, Ethereum, gold, and the S&P500 are 3.44% (9.11%), 4.34% (10.96%), 0.89% (2.19%), and 1.27% (6.07%), respectively.

Asymmetric nexus between COVID-19 outbreak in the world and cryptocurrency market

Article

Oct 2020
Int Rev Financ Anal

Abstract In the wake of recent pandemic of COVID-19, we explore its unprecedented impact on the cryptocurrencies' market. Specifically, we check how the changing intensity of the COVID-19 represented by the daily addition in new infections worldwide affects the daily returns of the top 10 cryptocurrencies according to the market capitalization. The results from Quantile-on-Quantile Regression (QQR) approach reveal that the changing intensity levels of the COVID-19 affect the Bearish and the Bullish market scenarios of cryptocurrencies differently (asymmetric impact). Additionally, there are differences between these currencies in their responses to the changing levels of this pandemic's intensity. Most of the currencies absorbed the small shocks of COVID-19 by registering positive gains but failed to resist against the huge changes except Bitcoin, ADA, CRO, and up to some extent Ethereum also. Our results reveal new and asymmetric dynamics of this emerging asset class against an extremely stressful and unpredictable event (COVID-19). Moreover, these results are robust to the use of alternative proxy (COVID-19 deaths) for pandemic intensity. Our findings help to improve investors and policymakers' understanding of the cryptocurrencies' market dynamics, especially in the times of extremely stressful and unseen events. Keywords: COVID-19; Bitcoin; Top 10 Cryptocurrencies; World; Quantile-on-Quantile regression.

Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis

Abstract

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