From the pandemic to the Russia–Ukraine crisis: Dynamic behavior of connectedness between financial markets and implications for portfolio management

This study assesses the time-varying connectedness and portfolio implications among equity markets, commodities, and cryptocurrencies. To this end, we employ the DCC-GARCH model and time-frequency framework on daily data. The sample covers a period spanning from January 2018 to October 2023. The results confirm the existence of financial contagion evidence during the pandemic outbreak and the Russian invasion of Ukraine among the equity markets and alternative assets. Furthermore, from the perspective of portfolio management, we find that gold can be a suitable asset for diversifying specific risks, followed by soft commodities and Bitcoin during tranquil periods. We demonstrate that gold serves as a good long-term safe investment, whereas gold and Bitcoin lose their safe-haven properties in the short and mid term. Conversely, oil is the least effective diversification and safe-haven asset for equities. However, the hedging analysis indicates an increase in the hedge ratio during crisis periods across all pairs. The hedging performance of each asset is modest and varies due to critical market circumstances during the pandemic and the war. These findings suggest that investors should frequently rebalance the portfolio structure rather than adopting a static method such as buy and hold.