Journal
DISCRETE DYNAMICS IN NATURE AND SOCIETY
Volume 2021, Issue -, Pages -Publisher
HINDAWI LTD
DOI: 10.1155/2021/2010705
Keywords
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Funding
- National Natural Science Foundation of China [71671145, 71971191]
- Humanities and Social Science Fund of Ministry of Education of China [17YJA790015, 17XJA790002, 18YJC790132, 18XJA790002]
- Science and Technology Innovation Team of Yunnan Provincial Universities [2019014]
- Yunnan Fundamental Research Projects [202001AS070018]
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The study found strong negative dependence between gold and USD, weak positive connection between Bitcoin and gold, and risk spillovers mainly exist between Bitcoin and gold, and between gold and USD. The risk spillover effects are unstable between Bitcoin and gold, but stable and asymmetric between gold and USD.
Understanding the dependence and risk spillover among hedging assets is crucial for portfolio allocation and regulatory decision making. Using various copula and conditional Value-at-Risk (CoVaR) measures, this paper quantifies the dependence and risk spillover effects between three traditional and emerging hedging assets: Bitcoin, gold, and USD. Furthermore, we investigate these effects at various short- and long-term horizons using a variational model decomposition (VMD) method. The empirical results show that there is strong negative dependence between gold and USD, but Bitcoin and gold are weakly and positively connected. Secondly, risk spillovers exist only between Bitcoin and gold and between gold and USD. The risk spillover effect between Bitcoin and gold are not stable, that is, if Bitcoin or gold faces the downward or upward risk, both the downward and upward risk of another asset have the chance to increase. The negative risk spillover between gold and USD is stable, especially in long-term horizons. Finally, the risk spillover between Bitcoin and gold as well as between gold and USD are asymmetric at downward and upward market environment.
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