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Do Cryptocurrencies and Traditional Asset Classes Influence Each Other?

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  • Josef Kurka

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Pod Vodarenskou Vezi 4, 182 00, Prague, Czech Republic)

Abstract

Large stream of literature studies interconnectedness among various assets that are relevant in current global markets. Transmission of shocks between cryptocurrencies and traditional asset classes is, however, not understood at all, but should not be ignored due to increasing influence of cryptocurrencies in recent years. In this paper, we study how shocks between the most liquid representatives of the traditional asset classes including commodities, foreign exchange, stocks, financials, and cryptocurrencies are being transmitted. Generally, we document very low level of connectedness between the main cryptocurrency and other studied assets. The only exception is gold which receives substantial amount of shocks from cryptocurrency market. Our findings are important since we show that cryptocurrencies play role in global markets, and the results could also be useful in portfolio diversification schemes. Moreover, we find significant positive asymmetry in spillovers between the studied assets, which is in contradiction to previous studies conducted on assets from a single asset class.

Suggested Citation

  • Josef Kurka, 2017. "Do Cryptocurrencies and Traditional Asset Classes Influence Each Other?," Working Papers IES 2017/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2017.
    • Handle: RePEc:fau:wpaper:wp2017_29
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    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other

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