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Dynamic Connectedness between Bitcoin, Gold, and Crude Oil Volatilities and Returns

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  • Serda Selin Ozturk

    (Department of Economics, Istanbul Bilgi University, 34060 Istanbul, Turkey)

Abstract

This paper analyzes the connectedness among bitcoin, gold, and crude oil between 3 January 2017 and 31 December 2019. The paper’s motivation is based upon the idea that bitcoin can be similar to gold in terms of its hedging properties and can be used for hedging for different assets. Moreover, although it is more metaphorical, bitcoin is also accepted because it is mined like crude oil, namely, a commodity. These similarities can be investigated by analyzing the connectedness among these financial assets. The connectedness results derived from both total connectedness and frequency connectedness methods indicate that volatility connectedness is higher than the return connectedness among these assets. Furthermore, connectedness in volatilities is mostly driven by medium frequency, although connectedness in returns mostly exists in high frequency. Therefore, these results suggest that investors should consider these financial assets for their diversification decisions. The results suggest that although diversification among these three assets is more difficult in the short- and medium-term, investors may benefit from diversification in the long-run.

Suggested Citation

  • Serda Selin Ozturk, 2020. "Dynamic Connectedness between Bitcoin, Gold, and Crude Oil Volatilities and Returns," JRFM, MDPI, vol. 13(11), pages 1-14, November.
    • Handle: RePEc:gam:jjrfmx:v:13:y:2020:i:11:p:275-:d:442690
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    5. Rubaiyat Ahsan Bhuiyan & Afzol Husain & Changyong Zhang, 2023. "Diversification evidence of bitcoin and gold from wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.
    6. Andrei-Dragos Popescu, 2021. "Assessing Portfolio Risks Involving Bitcoin and Ethereum Using Vector Autoregressive Model," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1101-1109, December.
    7. Bouazizi, Tarek & Galariotis, Emilios & Guesmi, Khaled & Makrychoriti, Panagiota, 2023. "Investigating the nature of interaction between crypto-currency and commodity markets," International Review of Financial Analysis, Elsevier, vol. 88(C).
    8. Thanasis Stengos, 2021. "Recent Developments in Cryptocurrency Markets: Co-Movements, Spillovers and Forecasting," JRFM, MDPI, vol. 14(3), pages 1-3, February.

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