Time-frequency co-movement and risk connectedness among cryptocurrencies: new evidence from the higher-order moments before and during the COVID-19 pandemic.

Analyzing comovements and connectedness is critical for providing significant implications for crypto-portfolio risk management. However, most existing research focuses on the lower-order moment nexus (i.e. the return and volatility interactions). For the first time, this study investigates the higher-order moment comovements and risk connectedness among cryptocurrencies before and during the COVID-19 pandemic in both the time and frequency domains. We combine the realized moment measures and wavelet coherence, and the newly proposed time-varying parameter vector autoregression-based frequency connectedness approach (Chatziantoniou et al. in Integration and risk transmission in the market for crude oil a time-varying parameter frequency connectedness approach. Technical report, University of Pretoria, Department of Economics, 2021) using intraday high-frequency data. The empirical results demonstrate that the comovement of realized volatility between BTC and other cryptocurrencies is stronger than that of the realized skewness, realized kurtosis, and signed jump variation. The comovements among cryptocurrencies are both time-dependent and frequency-dependent. Besides the volatility spillovers, the risk spillovers of high-order moments and jumps are also significant, although their magnitudes vary with moments, making them moment-dependent as well and are lower than volatility connectedness. Frequency connectedness demonstrates that the risk connectedness is mainly transmitted in the short term (1-7 days). Furthermore, the total dynamic connectedness of all realized moments is time-varying and has been significantly affected by the outbreak of the COVID-19 pandemic. Several practical implications are drawn for crypto investors, portfolio managers, regulators, and policymakers in optimizing their investment and risk management tactics.

Realized higher-order moments spillovers between commodity and stock markets: Evidence from China

Using 5-min data of Chinese stock market index and eight Chinese commodity futures (soybean, wheat, corn, gold, silver, copper and aluminum, crude oil) from March 26, 2018 to October 22, 2020, we analyze the dynamic spillover connectedness of returns and realized moments, including realized volatility, realized skewness, and realized kurtosis, during various shock periods via a time-varying parameter vector autoregression (TVP-VAR) connectedness approach. The results show that spillover effects between stock and commodity markets intensify during shock periods such as ‘Trade disputes between China and the United States’ and ‘COVID-19’. Volatility spillovers are relatively stronger;however, higher-order moment spillovers contain additional information of stock-commodity spillovers that cannot be observed from volatility spillovers. Shocks from the silver market influence all three realized moments of the entire financial markets. Soybean, corn, aluminum, and oil markets are easily affected by other markets. The contribution of wheat to the system of spillovers between stock and commodity markets is only observed at higher-order moments. Further analyses involving OLS and quantile regressions show that total spillovers are generally affected by the US stock market and economic uncertainties as well as the COVID epidemic. We construct daily realized volatility, skewness, and kurtosis using 5-min data of eight Chinese commodity futures and the Chinese stock market index from March 26, 2018 to October 22, 2020, then analyse the dynamic spillovers of realized moments among these markets. The results show that the spillover effects between commodity and stock markets intensify during shock periods such as ‘trade disputes between China and the United States’ and ‘COVID-19’. Volatility spillovers are relatively stronger than spillovers in skewness or spillovers in kurtosis;however, spillovers in higher-order moments seem to contain additional information. Shocks from the silver market influence realized moments of other markets. Soybean, corn, aluminium, and oil markets are affected by other markets. The contribution of wheat as a net transmitter to the system of spillovers between stock and commodity markets is only observed at higher-order realized moments. The results from OLS and quantile regressions show that the total spillovers are generally affected by the US stock market, economic uncertainties, and the COVID-19 outbreak.