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Do stochastic risks flow between industrial and precious metals, Islamic stocks, green bonds, green stocks, clean investments, major foreign exchange rates, and Bitcoin?

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  • Ghaemi Asl, Mahdi
  • Raheem, Ibrahim D.
  • Rashidi, Muhammad Mahdi

Abstract

This study examines the interactions between Bitcoin (BTC) and other major financial markets (forex, equity and bond, and industrial and precious metals). This interaction is viewed from the spectrum of spillover analysis, hedging, and portfolio analyses. Due to the high volatility and volatility clustering nature of most financial series, particularly BTC, we rely on a Multivariate Factor Stochastic Volatility (mvFSV) Model of Kastner et al. (2017). In order to capture the influence of extreme market conditions, we use a quantile-based mvFSV Model. Among other things, results confirm the importance of quantile analysis as results are sensitive to market conditions. For instance, currencies and industrial and precious metals are net transmitters of shocks at lower and middle quantiles, while these assets change their status to the net receiver of shocks at the upper quantile. Results of the total connectedness show that there is a high degree of interconnectedness among the assets, as the total connectedness index ranges between 86% and 100%. Besides, Islamic equities perform such as the most currencies and conventional assets in terms of the transmission of shocks and diversification benefits. The hedging potentials of Bitcoin over other assets were also examined, and results confirm that the hedging effectiveness is commodity-specific. Policy implications of these results are discussed.

Suggested Citation

  • Ghaemi Asl, Mahdi & Raheem, Ibrahim D. & Rashidi, Muhammad Mahdi, 2023. "Do stochastic risks flow between industrial and precious metals, Islamic stocks, green bonds, green stocks, clean investments, major foreign exchange rates, and Bitcoin?," Resources Policy, Elsevier, vol. 86(PA).
    • Handle: RePEc:eee:jrpoli:v:86:y:2023:i:pa:s0301420723008978
    DOI: 10.1016/j.resourpol.2023.104186
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    Cited by:

    1. Husain, Afzol & Karim, Sitara & Sensoy, Ahmet, 2024. "Financial fusion: Bridging Islamic and Green investments in the European stock market," International Review of Financial Analysis, Elsevier, vol. 94(C).

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    More about this item

    Keywords

    Bitcoin; Forex; Metals; Equity; Bonds; Stochastic volatility;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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