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Risk substitution in cryptocurrencies: Evidence from BRICS announcements

Author

Listed:
  • Goodell, John W.
  • Alon, Ilan
  • Chiaramonte, Laura
  • Dreassi, Alberto
  • Paltrinieri, Andrea
  • Piserà, Stefano

Abstract

We investigate the impact of BRICS regulatory announcements on cryptocurrency volatilities and returns. Results evidence risk substitutions after announcements moving from ETH, XRP and LTC to BTC and vice versa, with BTC having volatility reactions to regulatory announcements that differ from those of other cryptocurrencies. Bootstrap quantile regression indicates a stronger detrimental impact of announcements when BTC is currently manifesting lower volatility and higher daily returns. Robustness checks confirm our findings, as well as evidence that the cryptocurrencies in our sample are considerably more reactive to BRICS announcements than US Fed announcements, suggesting important linkages between emerging markets and cryptocurrencies.

Suggested Citation

  • Goodell, John W. & Alon, Ilan & Chiaramonte, Laura & Dreassi, Alberto & Paltrinieri, Andrea & Piserà, Stefano, 2023. "Risk substitution in cryptocurrencies: Evidence from BRICS announcements," Emerging Markets Review, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:ememar:v:54:y:2023:i:c:s1566014122000553
    DOI: 10.1016/j.ememar.2022.100938
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    More about this item

    Keywords

    Bitcoin; Ethereum; Ripple; Litecoin; Cryptocurrencies; BRICS; Emerging markets; Regulatory announcements; FED;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G19 - Financial Economics - - General Financial Markets - - - Other

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