The Dynamic Relationship of Volatilities and Hedging between Cryptocurrencies and Other Financial Assets

Authors

  • Pitipat Nittayakamolphun Faculty of Management Science, Buriram Rajabhat University, Thailand
  • Thanchanok Bejrananda Faculty of Economics, Maejo University, Thailand
  • Panjamapon Pholkerd Faculty of Management Science, Buriram Rajabhat University, Thailand

Keywords:

cryptocurrency, other financial assets, hedge

Abstract

Cryptocurrencies have created opportunities and challenges in investment as well as providing higher returns than other financial assets. Despite the unclear role and risks of cryptocurrencies, the opportunities they offer have attracted a number of investors to the crypto market. This study, thus, aims to analyze the dynamic relationship of volatilities and hedging between cryptocurrencies and other financial assets using Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH). The daily data span from August 2016 to December 2021. The result for volatilities showed a low dynamic correlation between cryptocurrencies and other financial assets and the ability to hedge minimal risk. Hence, investors should diversify the risk in their portfolios by investing in cryptocurrencies together with other financial assets without compromising the expected return.

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Published

2022-05-11

How to Cite

Nittayakamolphun, P., Bejrananda, T. ., & Pholkerd, P. . (2022). The Dynamic Relationship of Volatilities and Hedging between Cryptocurrencies and Other Financial Assets. Applied Economics Journal, 29(1), 78–99. Retrieved from https://so01.tci-thaijo.org/index.php/AEJ/article/view/255406

Issue

Section

Research Articles