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Revisiting the cryptocurrencies role in stock markets: ADCC-GARCH and Wavelet Coherence

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  • Susovon Jana
  • Tarak Nath Sahu
  • Krishna Dayal Pandey

Abstract

The current study analyses five major cryptocurrencies and four global stock markets to explore the hedging, safe haven and diversification roles of cryptocurrencies by employing ADCC-GARCH and Wavelet Coherence Technique. The study has found that stock and cryptocurrency markets return have high volatility persistence in the long run and confirms the bi-directional volatility transmission. Also, the hedging capacity of digital currencies varies depending on market choice. Tether operates as the most effective diversifier for all studied stock indices and is a strong safe haven asset during market turmoil. It is also documented that majority of cryptocurrencies cannot offer diversification advantages.

Suggested Citation

  • Susovon Jana & Tarak Nath Sahu & Krishna Dayal Pandey, 2024. "Revisiting the cryptocurrencies role in stock markets: ADCC-GARCH and Wavelet Coherence," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 17(1), pages 110-135, January.
  • Handle: RePEc:taf:macfem:v:17:y:2024:i:1:p:110-135
    DOI: 10.1080/17520843.2023.2211380
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