Conditional dependence structure and risk spillovers between Bitcoin and fiat currencies

This paper investigates the extreme dependence and risk spillovers between Bitcoin and the currencies of the BRICS and G7 economies. We find time-varying dependence between Bitcoin and all currencies. Moreover, when analysing risk spillovers from Bitcoin to currencies, we find that Bitcoin exercises significant power over most currencies, with the South African rand and Brazilian real holding both the highest downside and upside risk before and during the COVID-19 pandemic period, respectively. When considering risk spillovers from currencies towards Bitcoin, the Japanese yen exhibits the highest downside spillovers. Importantly, we find asymmetric spillovers between extreme upward and downward movements. • We study dependencies between Bitcoin and the currencies of the BRICS and G7 economies. • We find time-varying dependence between Bitcoin and all of the fiat currencies. • Bitcoin exercises significant power over most of the considered currencies. • We find asymmetric spillovers between extreme upward and downward movements. [ FROM AUTHOR] Copyright of Emerging Markets Review is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Key market identification, mechanism transmission, and extreme shock during the risk spillover process: an empirical study of the G20 FOREX markets.

The role of the G20 in global governance has been increasingly prominent in the context of the extensive spread of coronavirus disease 2019 and the aggravation of financial risk contagion. Detecting the risk spillovers among the G20 FOREX markets is crucial to maintain financial stability. Therefore, this paper first adopts a multi-scale approach to measure the risk spillovers among the G20 FOREX markets from 2000 to 2022. Furthermore, the key markets, the transmission mechanism, and the dynamic evolution are researched based on the network analysis. We derive the following findings: (1) The magnitude and volatility of the total risk spillover index of the G20 countries are highly associated with extreme global events. (2) The magnitude and volatility of risk spillovers among the G20 countries are asymmetric in the different extreme global events. (3) The key markets in the risk spillover process are identified, and the USA always occupies a core position in the G20 FOREX risk spillover networks. (4) In the core clique, the risk spillover effect is obviously high. In the clique hierarchy, as the risk spillover effect is transmitted downward, the risk spillovers present the decrease trends. (5) The density, transmission, reciprocity, and clustering degrees in the G20 risk spillover network during the COVID-19 period are much higher than that in other periods.

Risk spillover network in the supply chain system during the COVID-19 crisis: Evidence from China.

The COVID-19 crisis seriously impacted the global economy and supply chain system. Unlike previous studies, this paper examines the risk spillover effects within the supply chain system rather than between financial and other specific industries. The hypotheses are proposed by developing and simulating an agent-based model; the copula-conditional value at risk model is employed to empirically validate these hypotheses in China during the COVID-19 crisis. The findings reveal that risks are transmitted and amplified from downstream, through midstream to upstream. Additionally, the financial industry amplifies the risk spillover from the midstream to the upstream and downstream. Moreover, the risk spillovers exhibit significant time-varying characteristics, and policy interventions can potentially mitigate the effect of such spillovers. This paper provides a theoretical basis and empirical evidence for risk spillover in supply chain systems and offers suggestions for industrial practitioners and regulators.

From forests to faucets to fuel: Investigating the domino effect of extreme risk in timber, water, and energy markets

This study explores the interdependence between timber, water, and energy markets and investigates the potential domino effect of extreme risk across these markets. Specifically, using CAViaR-TVP-VAR, we examine the role of water and timber investments as safe-havens and hedges for traditional energy markets, before and after the COVID-19 pandemic. Our results indicate that water and timber markets can serve as reliable safe-haven options for energy investors. Moreover, our findings suggest a weak link between natural gas and its counterparts, underscoring the need for energy portfolios to diversify. This study provides valuable insights for investors seeking to navigate extreme risk.

Dynamic spillovers between clean energy and non-ferrous metals markets in China: A network-based analysis during the COVID-19 pandemic

Due to the close production link between clean energy and non-ferrous metals, their price and market dynamics can easily affect one another through production costs. Furthermore, with the increased financialization of clean energy and non-ferrous metals markets, investment risk can easily spread between them. Therefore, this paper intends to explore the risk contagion between the two markets through the spillover index model and the minimum spanning tree (MST) method. Employing the data collected in China, this paper quantifies the magnitude of risk transfer by the volatility spillovers of eight clean energy stock markets as identified in The Energy Conservation and Environmental Protection Clean Industry Statistical Classification 2021 and the eight corresponding non-ferrous metals futures markets, while fully considering the heterogeneity between sub-markets. First, we find that risk is mainly transmitted from clean energy to non-ferrous metals. Second, this paper identifies not only the most influential market but also the shortest path of risk contagion based on the MST topology analysis. Last, the empirical results show that the COVID-19 has increased the scale of risk transmission between the two markets and their connectivity. During the COVID-19 period, the shortest path between the two markets shifted from "hydropower–gold” to "smart grid–zinc”, and the systematically influential markets correspondingly become smart grid and zinc. The results obtained in this paper might have practical implications for policymakers seeking to achieve effective risk management, which could also facilitate investors for diversification benefits. © 2023 Elsevier Ltd

COVID-19 vaccinations and risk spillovers: Evidence from Asia-Pacific stock markets

This study investigates the impact of COVID-19 vaccinations on volatility (risk) spillovers among major Asia-Pacific stock markets. Utilizing both mean-based and quantile-based connectedness approaches, we examine the evolving patterns and network structure of risk spillovers not only on average but also in the extreme left and right tails. Risk spillovers are typically stronger under extreme shocks. A common regularity observed in the dynamics of standard (average) and extreme risk spillovers is that there are fewer risk spillovers after the launch of the COVID-19 vaccines. We also conduct a series of regression analyses to investigate the association between spillover levels and vaccination rates. The regression results support that an increase in vaccinations is associated with an decrease in standard risk spillovers. Besides, it is observed that vaccinations have an asymmetric impact on the extreme downside-tail and upside-tail risk spillovers. Further, panic sentiment is identified as a potential channel through which vaccinations affect spillovers. Our findings point to the role of COVID-19 vaccinations in stabilizing the Asia-Pacific stock markets by reducing risk spillovers. © 2023 Elsevier B.V.

Systemic risk spillovers and the determinants in the stock markets of the Belt and Road countries

We construct time-varying tail risk networks to investigate systemic risk spillovers in the Belt and Road (B&R) stock markets during 2008–2021. Network metrics clearly reflect aggregate risk level and individual risk accumulation for the B&R stock markets under extreme events (e.g., 2008 financial crisis and COVID-19 pandemic). Tail-event driven network quantile regression analysis shows that network impacts of the B&R stock markets under different risk levels are asymmetric and regional heterogeneity. Panel analysis on determinants of systemic risk spillovers shows that cross-border investment and international trade are significant contagion channels while economic freedom is potential driver. © 2023 Elsevier B.V.

How Connected is Crude Oil to Stock Sectors Before and After the COVID-19 Outbreak? Evidence from a Novel Network Method

A novel network with Wavelet denoising-GARCHSK and Mixed CoVaR method is proposed to construct full-sample and dynamic networks for investigating the risk spillover effects across international crude oil and Chinese stock sectors before and after the COVID-19 outbreak. The empirical results denote that the total bidirectional oil-sector risk spillover effects increase rapidly after the COVID-19 outbreak. Interestingly, sectors shift from net risk receivers to net risk contributors in the oil-sector risk transfer effects during the pandemic period. Second, unlike the pre-COVID-19 period, Shanghai crude (SC) replaces Brent as the largest oil risk transmitter to stocks during the COVID-19 period. Third, there are notable sectoral features in the oil-sector risk spillovers, which differ across different periods. After the burst, Energy has an incredibly weak connection with crude oil, while the sectors, which oil products are input for, become close with crude oil. Far more surprising is that the petroleum-independent sectors have increasing closer risk transfer effects with crude, even becoming the largest risk contributors to oil, after that. Finally, the oil-sector relationships during the same period are time-varying but stable. This paper provides policymakers and investors with new method and insight into the oil-sector relationships. [ABSTRACT FROM AUTHOR] Copyright of Fluctuation & Noise Letters is the property of World Scientific Publishing Company and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Spillovers between positively and negatively affected service sectors from the COVID-19 health crisis: Implications for portfolio management

This study empirically investigates and contributes new evidence to the ongoing topic of potential volatility spillover, efficient portfolio management, and hedging strategies. We investigate the connectedness between the travel and leisure sector (which was negatively affected by the COVID-19 pandemic) and healthcare, technology, and telecommunications sectors (which were positively impacted by the pandemic). We selected these four service sectors because they have been impacted by the pandemic and are also crucial for the world's economy. We separately perform a connectedness analysis for four regions: Europe, Eastern Europe, Asia-Pacific, and North America. The main findings indicate a rise in return and volatility spillovers during the COVID-19 outbreak in the selected sectors. Healthcare, telecommunications, and technology sectors are major transmitters of volatility shocks to the travel and leisure sector during the crisis. The portfolio analysis shows that investors should include healthcare, telecommunications, and technology sectors in their equity portfolios to reduce investment risk and protect expected returns during the pandemic. Hedge ratios vary over crisis and non-crisis periods, highlighting the option of adjusting hedging strategies during turbulent and stable periods. The study also evaluates efficient portfolio management strategies shaped during the COVID-19 pandemic using the estimated results of the DCC-GARCH approach. © 2023

Risk spillovers in global financial markets: Evidence from the COVID-19 crisis

This paper aims to comprehensively investigate the dynamics of short-, medium- and long-term risk spillovers across the major financial markets in the context of COVID-19. Our main empirical findings are as follows. First, we find that the deterioration of the COVID-19 pandemic raised the risk of stock, bond, crude oil, and foreign exchange markets sequentially in the short term. Second, from the perspective of the medium and long term, the COVID-19 pandemic triggered substantial risk spillovers across financial markets, which is also highly correlated with the degree of investor panic. Third, we show that different markets played different roles in terms of risk transmission during the pandemic. Specifically, the stock and crude oil markets acted more as risk senders, the gold and foreign exchange markets acted more as risk receivers, and the bond market served as a transfer station of risk. Finally, we find that containment and health responses can effectively mitigate risk spillovers across markets in the short term, while expansionary fiscal policy can reduce them more effectively in the medium and long term. Our findings have important implications for policymakers and investors who aim to mitigate the adverse impact of the COVID-19 pandemic on financial markets. © 2022 Elsevier Inc.

Dynamic comovement and extreme risk spillovers between international crude oil and China's non-ferrous metal futures market

This paper analyses the dynamic comovement and extreme risk spillovers between international crude oil and China's non-ferrous metals futures by combining the application of Copula and CoVaR models, considering the effects of structural breaks and the frequency of cycles. The results show a positive linkage between crude oil and China's non-ferrous metals, with significant long-period comovement. Upside risk in crude oil prices can generate stronger extreme shocks to non-ferrous metals, as evidenced by the outbreak of COVID-19 in 2020. Compared to zinc and aluminum, copper is more susceptible to risk spillovers from crude oil, particularly in the event of a downside trend in crude oil. In addition, WTI crude oil and Brent crude oil show some variability in the upper and lower tail spillover effects. Our research explained to some extent the time-varying, cyclical and asymmetric impact on the non-ferrous metal futures market under crude oil shocks, which can be informative for industry planners, regulators, and investors in making targeted decisions. It is mainly the case when dealing with the many effects of geopolitical conflicts, trade frictions, and commodity supply and demand mismatches.

Dynamic spillovers and asymmetric connectedness between fossil energy and green financial markets: Evidence from China

With the purpose of risk management for fossil energy investors, this paper examines the dynamic spillover effect and asymmetric connectedness between fossil energy, green financial and major traditional financial markets in China. By employing the spillover index model of Diebold and Yilmaz, a weak correlation between green financial and fossil energy markets is verified, and the market connectedness remains relatively calm despite the COVID-19 pandemic outbreak. Specifically, green bonds receives fewer shocks from crude oil than coal, green stocks receive fewer shocks from coal than crude oil. In addition, rather than the safe-haven characteristics presented by gold, this paper further proves that green bonds also have the potential to act as safe-haven assets, due to the fact that the connectedness between green bonds and energy markets is at low levels. Finally, the magnitude of return spillovers between markets would vary significantly during different periods. The results obtained in this paper have practical implications for both investors and policymakers. Copyright © 2022 Deng, Guan, Zheng, Xing and Liu.

COVID-19 and risk spillovers of China's major financial markets: Evidence from time-varying variance decomposition and wavelet coherence analysis.

COVID-19 has influenced financial markets drastically; however, this influence has received little attention, particularly in China. This study investigates risk spillovers across China's financial and shipping markets through dynamic spillover measures based on time-varying parameter vector autoregression and generalized forecast error variance decompositions. Stock, fund, and futures markets are identified as major risk senders, whereas other markets are identified as major risk receivers. Surprisingly, bonds, gold, and shipping are safe havens that facilitate portfolio optimization. Furthermore, using wavelet coherence analysis, we find that the coherence between dynamic total spillover and COVID-19 varies across time and frequency domains.

Risk spillovers in global financial markets: Evidence from the COVID-19 crisis

This paper aims to comprehensively investigate the dynamics of short-, medium- and long-term risk spillovers across the major financial markets in the context of COVID-19. Our main empirical findings are as follows. First, we find that the deterioration of the COVID-19 pandemic raised the risk of stock, bond, crude oil, and foreign exchange markets sequentially in the short term. Second, from the perspective of the medium and long term, the COVID-19 pandemic triggered substantial risk spillovers across financial markets, which is also highly correlated with the degree of investor panic. Third, we show that different markets played different roles in terms of risk transmission during the pandemic. Specifically, the stock and crude oil markets acted more as risk senders, the gold and foreign exchange markets acted more as risk receivers, and the bond market served as a transfer station of risk. Finally, we find that containment and health responses can effectively mitigate risk spillovers across markets in the short term, while expansionary fiscal policy can reduce them more effectively in the medium and long term. Our findings have important implications for policymakers and investors who aim to mitigate the adverse impact of the COVID-19 pandemic on financial markets.

Conditional dependence structure and risk spillovers between Bitcoin and fiat currencies

This paper investigates the extreme dependence and risk spillovers between Bitcoin and the currencies of the BRICS and G7 economies. We find time-varying dependence between Bitcoin and all currencies. Moreover, when analysing risk spillovers from Bitcoin to currencies, we find that Bitcoin exercises significant power over most currencies, with the South African rand and Brazilian real holding both the highest downside and upside risk before and during the COVID-19 pandemic period, respectively. When considering risk spillovers from currencies towards Bitcoin, the Japanese yen exhibits the highest downside spillovers. Importantly, we find asymmetric spillovers between extreme upward and downward movements.

Extreme risk spillovers across financial markets under different crises

We examine how extreme risk spillovers caused by different crises transmit through financial markets in the US, Europe and Asia-Pacific regions. By modifying the bivariate peak-over-threshold and DCC-GARCH models and using daily negative log-returns from November 1991 to August 2020, we find significant bidirectional extreme risk spillovers with persistent effects between US and other markets. Contributions to extreme risk spillovers vary across crises. The recent COVID-19 shock (non-financial channel) and the 2007–2008 global crisis (financial channel) contribute more to extreme risk spillovers. Moreover, the extreme spillovers in the COVID-19 shock depend more on the non-financial channel compared to the global crisis and cause larger contributions to extreme losses, showing the impact of the non-financial shocks on financial markets.

Spillover effects between commodity and stock markets: A SDSES approach

In this paper, we use a state-dependent sensitivity expected shortfall (SDSES) approach using expectiles. This model enables us to quantify the direction, size, and persistence of risk spillovers among the US and emerging market stock indices and different individual commodities as a function of the state of financial markets (tranquil, normal, and volatile). We obtain high and more significant spillovers and financialization process evidence in the volatile state of the post-Draghi speech and COVID-19 period, especially for the copper and wheat market. Market stock indices and commodity US market index appear to play a major role in the transmission of shocks to other markets, mainly to the wheat market.

The existence of flight-to-quality under extreme conditions: Evidence from a nonlinear perspective in Chinese stocks and bonds' sectors

The COVID-19 pandemic has showed that distress to the financial system is always accompanied with the interconnection between the stock and bond markets. However, limited studies have identified the flight-toquality effect between these two markets from a nonlinear extreme perspective. Thus, using the multi-quantile VaR Granger causality test that measures the non-linearity of extreme risk, we investigated this effect in Chinese sectors via extreme risk spillover networks. Based on the findings, defensive (offensive) sectors are dominant in the stock market when facing upside (downside) risk to avoid potential investment losses. The results also confirm the robustness of the conclusion that the investment function of the financial markets weakened during the financial crisis. Moreover, compared to the Financial Bond and Enterprise Bond, the Government Bond is likely to show better risk hedging effect in cross-market risk spillover networks due to its high information transparency.

Tail risk connectedness in the refined petroleum market: A first look at the impact of the COVID-19 pandemic

This study provides a novel framework for analysing systematic tail risk transmission mechanisms by combining the Conditional Autoregressive Value-at-Risk (CAViaR) model with the recently developed Time-Varying Parameter Vector Autoregressive (TVP-VAR) based connectedness approach. We estimate dynamic spillovers across two crude oil (Brent and WTI) and four refined petroleum product (gasoline, heating oil, jet fuel and propane) prices from January, 17, 1997 to December 11, 2020. Results show that, both heating oil and kerosene are persistent net transmitters of shocks, signifying the important role of liquidity in the relevant markets. In addition, the role of either crude oil type appears to shift around 2009 following developments in the energy market. Overall, our findings suggest that, total connectedness are positively affected by major crisis episodes and that the recent COVID-19 pandemic appears to have the potential to propel both tail risk and exposure to losses to levels akin to those of the Global Financial Crisis of 2007–2008.

Impacts of COVID-19 outbreak, macroeconomic and financial stress factors on price spillovers among green bond.

We examine the impacts of the COVID-19 pandemic and global risk factors on the upside and downside price spillovers of MSCI global, building, financial, industrial, and utility green bonds (GBs). Using copulas, CoVaR, and quantile regression approaches, we show symmetric tail dependence between MSCI global GB and both building and utility GBs. Moreover, the upper tail dependence between MSCI global GB and financial GB intensified during COVID-19. We find asymmetric risk spillovers from MSCI global GB to the remaining GBs. Finally, the COVID-19 spread, the Citi macro risk index, and the financial condition index contribute positively to the quantiles' risk spillovers. The spillover index method shows significant dynamic volatility spillovers from global GB to GB sectors that intensify during the pandemic outbreak, except for financial GB. The causality-in-mean and in-variance from COVID-19, Citi macro risk index, and US financial condition index to the downside and upside spillover effects are sensitive to quantiles.