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Gold prices and the cryptocurrencies: Evidence of convergence and cointegration

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  • Adebola, Solarin Sakiru
  • Gil-Alana, Luis A.
  • Madigu, Godfrey

Abstract

This paper deals with the analysis of the relationship between cryptocurrencies and gold prices. In particular, we use fractional integration and cointegration techniques to examine the degree of persistence of the series and the possibility of short and long run equilibrium relationships between them. Our results indicate that there is evidence of mean reversion in gold prices and also in some of the cryptocurrencies; however, cointegration is only found in a few cases with a very small degree of cointegration in the long run relationship. Testing the hypothesis of convergence throughout the ratios, again we only found evidence of mean reversion in the cases of Bytecoin, Dash, Ether, Monero and Ether.

Suggested Citation

  • Adebola, Solarin Sakiru & Gil-Alana, Luis A. & Madigu, Godfrey, 2019. "Gold prices and the cryptocurrencies: Evidence of convergence and cointegration," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 1227-1236.
    • Handle: RePEc:eee:phsmap:v:523:y:2019:i:c:p:1227-1236
    DOI: 10.1016/j.physa.2019.04.123
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    3. Oloko, Tirimisiyu F. & Ogbonna, Ahamuefula E. & Adedeji, Abdulfatai A. & Lakhani, Noman, 2021. "Fractional cointegration between gold price and inflation rate: Implication for inflation rate persistence," Resources Policy, Elsevier, vol. 74(C).
    4. Mensi, Walid & El Khoury, Rim & Ali, Syed Riaz Mahmood & Vo, Xuan Vinh & Kang, Sang Hoon, 2023. "Quantile dependencies and connectedness between the gold and cryptocurrency markets: Effects of the COVID-19 crisis," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Figà-Talamanca, Gianna & Focardi, Sergio & Patacca, Marco, 2021. "Regime switches and commonalities of the cryptocurrencies asset class," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
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    7. Xiao Fan Liu & Xin-Jian Jiang & Si-Hao Liu & Chi Kong Tse, 2020. "Knowledge Discovery in Cryptocurrency Transactions: A Survey," Papers 2010.01031, arXiv.org.
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    9. Seyram Pearl Kumah & Jones Odei Mensah, 2022. "Are cryptocurrencies connected to gold? A wavelet‐based quantile‐in‐quantile approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3640-3659, July.
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    More about this item

    Keywords

    Gold prices; Cryptocurrencies; Cointegration; Convergence;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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