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Risk Spillover between Bitcoin and Conventional Financial Markets: An Expectile-Based Approach

Author

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  • Yue-Jun Zhang

    () (Business School, Hunan University, Changsha 410082, China; Center for Resource and Environmental Management, Hunan University, Changsha 410082, China)

  • Elie Bouri

    () (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon
    Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Shu-Jiao Ma

    (Business School, Hunan University, Changsha 410082, China; Center for Resource and Environmental Management, Hunan University, Changsha 410082, China)

  • Rangan Gupta

Abstract

We challenge the existing literature that points to the detachment of Bitcoin from the global financial system. We use daily data from August 17, 2011 - February 14, 2020 and apply a risk spillover approach based on expectiles. Results show reasonable evidence to imply the existence of downside risk spillover between Bitcoin and four assets (equities, bonds, currencies, and commodities), which seems to be time dependent. Our main findings have implications for participants in both the Bitcoin and the traditional financial markets for the sake of asset allocation, and risk management. For policy makers, our findings suggest that Bitcoin should be monitored carefully for the sake of financial stability.

Suggested Citation

  • Yue-Jun Zhang & Elie Bouri & Shu-Jiao Ma & Rangan Gupta, 2020. "Risk Spillover between Bitcoin and Conventional Financial Markets: An Expectile-Based Approach," Working Papers 202027, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:202027
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    References listed on IDEAS

    as
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    Keywords

    Bitcoin; financial markets; asset classes; downside risk spillover; expectile VaR; CAR-ARCHE;
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