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Co-movement and return spillover: evidence from Bitcoin and traditional assets

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  • Shan Wu

    (Nanjing University of Finance and Economics)

Abstract

To analyze the asset attribute and hedge effect of Bitcoin, we investigate the relationship between Bitcoin and several kinds of traditional financial assets by the univariate GARCH and multivariate GARCH models. We find that Bitcoin has a unique risk-return characteristic and volatility clustering performance, its high volatility persistence similar to Gold, but different from currency. In addition, Bitcoin exhibits a significant one-way spillover effect with other variables, without a two-way spillover effect. Bitcoin is much more affected by other market shocks than other markets are affected by the impact of Bitcoin shocks, which could not be a haven but a weak hedge. From the dynamic linkage perspective, Bitcoin and Gold have different connectedness to other markets, Gold exhibits a stronger movement to other markets, especially during extreme situations. To summarize, we classify Bitcoin as a high speculative financial asset between Gold and currency, but not Gold or currency. Our study has important implications for investors, policymakers, and risk managers who are interested in Bitcoin.

Suggested Citation

  • Shan Wu, 2021. "Co-movement and return spillover: evidence from Bitcoin and traditional assets," SN Business & Economics, Springer, vol. 1(10), pages 1-16, October.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:10:d:10.1007_s43546-021-00126-w
    DOI: 10.1007/s43546-021-00126-w
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    1. Mutaju Isaack Marobhe & Jonathan Mukiza Peter Kansheba, 2023. "High frequency volatility spillover between oil and non-energy commodities during crisis and tranquil periods," SN Business & Economics, Springer, vol. 3(4), pages 1-27, April.

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    More about this item

    Keywords

    Bitcoin; Linkage; Asset attributes; DCC–GARCH model;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G1 - Financial Economics - - General Financial Markets

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