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Asymmetric Multifractal Cross-Correlation Dynamics Between Fiat Currencies And Cryptocurrencies

Author

Listed:
  • LEONARDO H. S. FERNANDES

    (Department of Economics and Informatics, Federal Rural University of Pernambuco, Serra Talhada, PE 56909-535, Brazil)

  • WERNER KRISTJANPOLLER

    (��Departamento de Industrias, Universidad Técnica Federico Santa María, Av. España 1680, Valparaíso, Chile)

  • BENJAMIN MIRANDA TABAK

    (��School of Public Policy and Government, Getulio Vargas Foundation (EPPG/FGV), Brasilia, DF, Brazil)

Abstract

This paper performs the asymmetric multifractal cross-correlation analysis to examine the COVID-19 effects on three relevant high-frequency fiat currencies, namely euro (EUR), yen (YEN) and the Great Britain pound (GBP), and two cryptocurrencies with the highest market capitalization and traded volume (Bitcoin and Ethereum) considering two periods (Pre-COVID-19 and during COVID-19). For both periods, we find that all pairs of these financial assets are characterized by overall persistent cross-correlation behavior (αxy(0) > 0.5). Moreover, COVID-19 promoted an increase in the multifractal spectrum’s width, which implies an increase in the complexity for all pairs considered here. We also studied the Generalized Cross-correlation Exponent, which allows us to verify that there is no asymmetric behavior between Bitcoin and fiat currencies and between Ethereum and fiat currencies. We conclude that investing simultaneously in major fiat currencies and leading cryptocurrencies can reduce the portfolio risk, leading to improvement in the investment results.

Suggested Citation

  • Leonardo H. S. Fernandes & Werner Kristjanpoller & Benjamin Miranda Tabak, 2023. "Asymmetric Multifractal Cross-Correlation Dynamics Between Fiat Currencies And Cryptocurrencies," FRACTALS (fractals), World Scientific Publishing Co. Pte. Ltd., vol. 31(01), pages 1-20.
    • Handle: RePEc:wsi:fracta:v:31:y:2023:i:01:n:s0218348x23500068
    DOI: 10.1142/S0218348X23500068
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    Cited by:

    1. Kundan Mukhia & Anish Rai & SR Luwang & Md Nurujjaman & Sushovan Majhi & Chittaranjan Hens, 2024. "Complex network analysis of cryptocurrency market during crashes," Papers 2405.05642, arXiv.org.
    2. Saâdaoui, Foued, 2024. "Segmented multifractal detrended fluctuation analysis for assessing inefficiency in North African stock markets," Chaos, Solitons & Fractals, Elsevier, vol. 181(C).

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