Time-varying dependence between Bitcoin and green financial assets: A comparison between pre- and post-COVID-19 periods

ABSTRACT

This paper studies the time-varying market linkages between Bitcoin and green assets before and during the COVID-19 pandemic through a TVP-VAR model with stochastic volatility. Both the roles of uncertainty and environmental attention related to cryptocurrency are considered when modeling market linkages, which underlying asymmetry is detected from three perspectives, i.e., bidirectionality of the impact direction, time points where the unit shock of the IRF analysis is imposed, and before and after the pandemic. We find that the investment sheltering role of Bitcoin for green assets is enhanced and expanded after the onset of the pandemic, while green assets in turn consistently act as an effective hedge for Bitcoin irrespective of the pandemic. Additional analyses confirm the robustness of our findings, which possess implications for not only hedging against green portfolios but also seeking green shelters. © 2022 Elsevier B.V.