IDEAS home Printed from https://ideas.repec.org/a/eee/ememar/v54y2023ics1566014122000383.html
   My bibliography  Save this article

The dark side of Bitcoin: Do Emerging Asian Islamic markets help subdue the ethical risk?

Author

Listed:
  • Karim, Sitara
  • Lucey, Brian M.
  • Naeem, Muhammad Abubakr
  • Vigne, Samuel A.

Abstract

Continuous financing of illicit activities (drug and human trafficking, child abuse, cybercrimes) through Bitcoin nurtures the ethical risk of investors. Building on this argument, the current study investigates the extreme tail dependence between Bitcoin and Emerging Asian Islamic (EAI) markets. We report multiple tail-dependent copulas differing across turmoil periods for the whole sample period. Under the ethical-risk hypothesis and modern portfolio theory, our findings demonstrated stronger safe-haven properties of EAIs for Bitcoin to mitigate ethical risk, and higher diversification benefits are documented for both equally adjusted and optimal portfolios. We formulated useful implications for policymakers, governments, regulation authorities, ethical investors, and portfolio managers for policymaking and strategizing their investment portfolios.

Suggested Citation

  • Karim, Sitara & Lucey, Brian M. & Naeem, Muhammad Abubakr & Vigne, Samuel A., 2023. "The dark side of Bitcoin: Do Emerging Asian Islamic markets help subdue the ethical risk?," Emerging Markets Review, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:ememar:v:54:y:2023:i:c:s1566014122000383
    DOI: 10.1016/j.ememar.2022.100921
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1566014122000383
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ememar.2022.100921?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ahmed, Walid M.A., 2021. "How do Islamic equity markets respond to good and bad volatility of cryptocurrencies? The case of Bitcoin," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    2. Shahzad, Syed Jawad Hussain & Ferrer, Román & Ballester, Laura & Umar, Zaghum, 2017. "Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 9-26.
    3. Yousaf, Imran & Yarovaya, Larisa, 2022. "Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    4. Sitara Karim & Muhammad Abubakr Naeem & Nawazish Mirza & Jessica Paule-Vianez, 2022. "Quantifying the hedge and safe-haven properties of bond markets for cryptocurrency indices," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 23(2), pages 191-205, January.
    5. Naji Mansour Nomran & Razali Haron, 2021. "The impact of COVID-19 pandemic on Islamic versus conventional stock markets: international evidence from financial markets," Future Business Journal, Springer, vol. 7(1), pages 1-16, December.
    6. Foye, James, 2018. "A comprehensive test of the Fama-French five-factor model in emerging markets," Emerging Markets Review, Elsevier, vol. 37(C), pages 199-222.
    7. Cyril Caillault & Dominique Guegan, 2005. "Empirical estimation of tail dependence using copulas: application to Asian markets," Quantitative Finance, Taylor & Francis Journals, vol. 5(5), pages 489-501.
    8. Mensi, Walid & Ur Rehman, Mobeen & Maitra, Debasish & Hamed Al-Yahyaee, Khamis & Sensoy, Ahmet, 2020. "Does bitcoin co-move and share risk with Sukuk and world and regional Islamic stock markets? Evidence using a time-frequency approach," Research in International Business and Finance, Elsevier, vol. 53(C).
    9. Syed Jawad Hussain Shahzad & Chaker Aloui & Rania Jammazi & Muhammad Shahbaz, 2019. "Are Islamic bonds a good safe haven for stocks? Implications for portfolio management in a time-varying regime-switching copula framework," Applied Economics, Taylor & Francis Journals, vol. 51(3), pages 219-238, January.
    10. Urquhart, Andrew, 2018. "What causes the attention of Bitcoin?," Economics Letters, Elsevier, vol. 166(C), pages 40-44.
    11. Didik Susilo & Sugeng Wahyudi & Irene Rini Demi Pangestuti & Bayu Adi Nugroho & Robiyanto Robiyanto, 2020. "Cryptocurrencies: Hedging Opportunities From Domestic Perspectives in Southeast Asia Emerging Markets," SAGE Open, , vol. 10(4), pages 21582440209, November.
    12. Abakah, Emmanuel Joel Aikins & Addo, Emmanuel & Gil-Alana, Luis A. & Tiwari, Aviral Kumar, 2021. "Re-examination of international bond market dependence: Evidence from a pair copula approach," International Review of Financial Analysis, Elsevier, vol. 74(C).
    13. Sercan Demiralay & Selçuk Bayracı, 2021. "Should stock investors include cryptocurrencies in their portfolios after all? Evidence from a conditional diversification benefits measure," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6188-6204, October.
    14. Muhammad Abubakr Naeem & Mustafa Raza Rabbani & Sitara Karim & Syed Mabruk Billah, 2021. "Religion vs ethics: hedge and safe haven properties of Sukuk and green bonds for stock markets pre- and during COVID-19," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 16(2), pages 234-252, December.
    15. Naeem, Muhammad Abubakr & Bouri, Elie & Costa, Mabel D. & Naifar, Nader & Shahzad, Syed Jawad Hussain, 2021. "Energy markets and green bonds: A tail dependence analysis with time-varying optimal copulas and portfolio implications," Resources Policy, Elsevier, vol. 74(C).
    16. Rehman, Mobeen Ur & Asghar, Nadia & Kang, Sang Hoon, 2020. "Do Islamic indices provide diversification to bitcoin? A time-varying copulas and value at risk application," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    17. Muhammad Abubakr Naeem & Mudassar Hasan & Muhammad Arif & Syed Jawad Hussain Shahzad, 2020. "Can Bitcoin Glitter More Than Gold for Investment Styles?," SAGE Open, , vol. 10(2), pages 21582440209, May.
    18. Nadia Arfaoui & Imran Yousaf, 2022. "Impact Of Covid-19 On Volatility Spillovers Across International Markets: Evidence From Var Asymmetric Bekk Garch Model," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-25, March.
    19. Bing-Yue Liu & Qiang Ji & Ying Fan, 2017. "A new time-varying optimal copula model identifying the dependence across markets," Quantitative Finance, Taylor & Francis Journals, vol. 17(3), pages 437-453, March.
    20. Andrew J. Patton, 2006. "Modelling Asymmetric Exchange Rate Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 527-556, May.
    21. Mahfooz Alam & Valeed Ahmad Ansari, 2020. "Are Islamic indices a viable investment avenue? An empirical study of Islamic and conventional indices in India," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 13(3), pages 503-518, June.
    22. Azad, A.S.M.S. & Azmat, Saad & Chazi, Abdelaziz & Ahsan, Amirul, 2018. "Sailing with the non-conventional stocks when there is no place to hide," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 1-16.
    23. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    24. Aalborg, Halvor Aarhus & Molnár, Peter & de Vries, Jon Erik, 2019. "What can explain the price, volatility and trading volume of Bitcoin?," Finance Research Letters, Elsevier, vol. 29(C), pages 255-265.
    25. Elsayed, Ahmed H. & Nasreen, Samia & Tiwari, Aviral Kumar, 2020. "Time-varying co-movements between energy market and global financial markets: Implication for portfolio diversification and hedging strategies," Energy Economics, Elsevier, vol. 90(C).
    26. Drew Creal & Siem Jan Koopman & André Lucas, 2008. "A General Framework for Observation Driven Time-Varying Parameter Models," Tinbergen Institute Discussion Papers 08-108/4, Tinbergen Institute.
    27. Ahmad, Wasim & Rais, Shirin & Shaik, Abdul Rahman, 2018. "Modelling the directional spillovers from DJIM Index to conventional benchmarks: Different this time?," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 14-27.
    28. Akyildirim, Erdinc & Corbet, Shaen & Lucey, Brian & Sensoy, Ahmet & Yarovaya, Larisa, 2020. "The relationship between implied volatility and cryptocurrency returns," Finance Research Letters, Elsevier, vol. 33(C).
    29. Cakici, Nusret & Fabozzi, Frank J. & Tan, Sinan, 2013. "Size, value, and momentum in emerging market stock returns," Emerging Markets Review, Elsevier, vol. 16(C), pages 46-65.
    30. Balli, Faruk & Naeem, Muhammad Abubakr & Shahzad, Syed Jawad Hussain & de Bruin, Anne, 2019. "Spillover network of commodity uncertainties," Energy Economics, Elsevier, vol. 81(C), pages 914-927.
    31. Mahfooz Alam & Valeed Ahmad Ansari, 2020. "Are Islamic indices a viable investment avenue? An empirical study of Islamic and conventional indices in India," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 13(3), pages 503-518, June.
    32. Ebrahim, M. Shahid & Jaafar, Aziz & Omar, Fatma A. & Salleh, Murizah Osman, 2016. "Can Islamic injunctions indemnify the structural flaws of securitized debt?," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 271-286.
    33. Naeem, Muhammad Abubakr & Karim, Sitara, 2021. "Tail dependence between bitcoin and green financial assets," Economics Letters, Elsevier, vol. 208(C).
    34. Peter Christoffersen & Kris Jacobs & Xisong Jin & Hugues Langlois, 2018. "Dynamic Dependence and Diversification in Corporate Credit [Asymmetric correlations of equity portfolios]," Review of Finance, European Finance Association, vol. 22(2), pages 521-560.
    35. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    36. Aymen Ben Rejeb & Mongi Arfaoui, 2019. "Do Islamic stock indexes outperform conventional stock indexes? A state space modeling approach," European Journal of Management and Business Economics, Emerald Group Publishing Limited, vol. 28(3), pages 301-322, February.
    37. Karim, Sitara & Lucey, Brian M. & Naeem, Muhammad Abubakr & Uddin, Gazi Salah, 2022. "Examining the interrelatedness of NFTs, DeFi tokens and cryptocurrencies," Finance Research Letters, Elsevier, vol. 47(PB).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rao, Amar & Lucey, Brian & Kumar, Satish & Lim, Weng Marc, 2023. "Do green energy markets catch cold when conventional energy markets sneeze?," Energy Economics, Elsevier, vol. 127(PA).
    2. Chengying He & Yong Li & Tianqi Wang & Salman Ali Shah, 2024. "Is cryptocurrency a hedging tool during economic policy uncertainty? An empirical investigation," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    3. Naeem, Muhammad Abubakr & Iqbal, Najaf & Karim, Sitara & Lucey, Brian M., 2023. "From forests to faucets to fuel: Investigating the domino effect of extreme risk in timber, water, and energy markets," Finance Research Letters, Elsevier, vol. 55(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Abubakr Naeem & Sitara Karim & Aviral Kumar Tiwari, 2023. "Risk Connectedness Between Green and Conventional Assets with Portfolio Implications," Computational Economics, Springer;Society for Computational Economics, vol. 62(2), pages 609-637, August.
    2. Anwer, Zaheer & Farid, Saqib & Khan, Ashraf & Benlagha, Noureddine, 2023. "Cryptocurrencies versus environmentally sustainable assets: Does a perfect hedge exist?," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 418-431.
    3. Naeem, Muhammad Abubakr & Karim, Sitara & Uddin, Gazi Salah & Junttila, Juha, 2022. "Small fish in big ponds: Connections of green finance assets to commodity and sectoral stock markets," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Naeem, Muhammad Abubakr & Karim, Sitara & Tiwari, Aviral Kumar, 2022. "Quantifying systemic risk in US industries using neural network quantile regression," Research in International Business and Finance, Elsevier, vol. 61(C).
    5. Mbarki, Imen & Khan, Muhammad Arif & Karim, Sitara & Paltrinieri, Andrea & Lucey, Brian M., 2023. "Unveiling commodities-financial markets intersections from a bibliometric perspective," Resources Policy, Elsevier, vol. 83(C).
    6. Billah, Mabruk & Karim, Sitara & Naeem, Muhammad Abubakr & Vigne, Samuel A., 2022. "Return and volatility spillovers between energy and BRIC markets: Evidence from quantile connectedness," Research in International Business and Finance, Elsevier, vol. 62(C).
    7. Naeem, Muhammad Abubakr & Lucey, Brian M. & Karim, Sitara & Ghafoor, Abdul, 2022. "Do financial volatilities mitigate the risk of cryptocurrency indexes?," Finance Research Letters, Elsevier, vol. 50(C).
    8. Umar, Zaghum & Yousaf, Imran & Gubareva, Mariya & Vo, Xuan Vinh, 2022. "Spillover and risk transmission between the term structure of the US interest rates and Islamic equities," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    9. Naeem, Muhammad Abubakr & Yousaf, Imran & Karim, Sitara & Yarovaya, Larisa & Ali, Shoaib, 2023. "Tail-event driven NETwork dependence in emerging markets," Emerging Markets Review, Elsevier, vol. 55(C).
    10. Ahmed, Walid M.A., 2021. "How do Islamic equity markets respond to good and bad volatility of cryptocurrencies? The case of Bitcoin," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    11. Sharif, Arshian & Brahim, Mariem & Dogan, Eyup & Tzeremes, Panayiotis, 2023. "Analysis of the spillover effects between green economy, clean and dirty cryptocurrencies," Energy Economics, Elsevier, vol. 120(C).
    12. Umar, Zaghum & Abrar, Afsheen & Hadhri, Sinda & Sokolova, Tatiana, 2023. "The connectedness of oil shocks, green bonds, sukuks and conventional bonds," Energy Economics, Elsevier, vol. 119(C).
    13. Rao, Amar & Lucey, Brian & Kumar, Satish & Lim, Weng Marc, 2023. "Do green energy markets catch cold when conventional energy markets sneeze?," Energy Economics, Elsevier, vol. 127(PA).
    14. Al Guindy, Mohamed, 2021. "Cryptocurrency price volatility and investor attention," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 556-570.
    15. Siddique, Md Abubakar & Nobanee, Haitham & Karim, Sitara & Naz, Farah, 2022. "Investigating the role of metal and commodity classes in overcoming resource destabilization," Resources Policy, Elsevier, vol. 79(C).
    16. Arfaoui, Nadia & Naeem, Muhammad Abubakr & Boubaker, Sabri & Mirza, Nawazish & Karim, Sitara, 2023. "Interdependence of clean energy and green markets with cryptocurrencies," Energy Economics, Elsevier, vol. 120(C).
    17. Rehman, Mobeen Ur, 2020. "Do bitcoin and precious metals do any good together? An extreme dependence and risk spillover analysis," Resources Policy, Elsevier, vol. 68(C).
    18. Naeem, Muhammad Abubakr & Appiah, Michael & Karim, Sitara & Yarovaya, Larisa, 2023. "What abates environmental efficiency in African economies? Exploring the influence of infrastructure, industrialization, and innovation," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    19. Balli, Faruk & Billah, Mabruk & Balli, Hatice Ozer & De Bruin, Anne, 2022. "Spillovers between Sukuks and Shariah-compliant equity markets," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    20. Yun-Shi Dai & Ngoc Quang Anh Huynh & Qing-Huan Zheng & Wei-Xing Zhou, 2023. "Correlation structure analysis of the global agricultural futures market," Papers 2310.16849, arXiv.org.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:54:y:2023:i:c:s1566014122000383. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620356 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.