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Spillovers and hedging effectiveness between islamic cryptocurrency and metal markets: Evidence from the COVID-19 outbreak

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  • Yousaf, Imran
  • Ali, Shoaib
  • Marei, Mohamed
  • Gubareva, Mariya

Abstract

This study investigates the static and dynamic interdependence of the Islamic cryptocurrency and metal markets using the TVP-VAR methodology. The empirical findings suggest that Islamic cryptocurrencies are the recipients of both return and volatility spillovers, while most metals act as transmitters of these spillovers. The dynamic spillovers are intensified in the COVID-19 period compared to the pre-COVID-19 period. We find that the return connectedness is short-lived lived whereas the volatility connectedness is a long-term phenomenon. Finally, we also compute the optimal weights, hedge ratios, and hedging effectiveness during COVID-19. The results suggest that investors should add Islamic cryptocurrencies to metals portfolios in order to get maximum risk-adjusted returns during the pandemic crisis. Our findings are helpful for portfolio managers and investors in making decisions regarding diversification, portfolio allocation, forecasting, and hedging.

Suggested Citation

  • Yousaf, Imran & Ali, Shoaib & Marei, Mohamed & Gubareva, Mariya, 2024. "Spillovers and hedging effectiveness between islamic cryptocurrency and metal markets: Evidence from the COVID-19 outbreak," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1126-1151.
    • Handle: RePEc:eee:reveco:v:92:y:2024:i:c:p:1126-1151
    DOI: 10.1016/j.iref.2024.02.075
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    Keywords

    Islamic cryptocurrencies; Metal markets; Spillovers; COVID-19;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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