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08-05-2020 | Original Research

Dynamic Linkages and Economic Role of Leading Cryptocurrencies in an Emerging Market

Authors: Maurice Omane-Adjepong, Imhotep Paul Alagidede

Published in: Asia-Pacific Financial Markets | Issue 4/2020

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Abstract

Motivated by the exponential growth of the cryptocurrency market and the need for more empirical work to understand the dynamics of the young financial market, this paper, through time- and frequency-varying techniques examines the extent of linkages between leading cryptocurrencies and diverse traditional assets of emerging economies. Using variants of the multivariate conditional heteroscedasticity models and a dummy, we assess the economic potential, each for Bitcoin and Ripple, from the perspective of an emerging market investor. The results, from both time and frequency analyses indicate that the two major cryptocurrency assets have not yet coupled with the emerging assets, as weaker to lower-moderate correlations characterise movements of the pairs. Additionally, our results unveil a multifaceted economic benefit of Bitcoin and Ripple, however, this varies across emerging asset classes (forex and equities), country-specific assets, and regional emerging market groupings. The findings hold some implications for investors, regarding portfolio diversification and risk management.

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The date format is given by dd.mm.year.

The cryptocurrency data was obtained from https://coinmarketcap.com/ on 05.03.2019. We later updated it on 07.06.2019 to reflect current price movement.

Refer, www.ifrs.org/groups/emerging-economies-group/#members for a complete list of the countries.

The equity data is sourced from Bloomberg database terminal.

Estimation codes and coefficients are readily accessible from authors.

We followed the method and computational approach of Polanco-Martínez and Fernández-Macho (2014).

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Title: Dynamic Linkages and Economic Role of Leading Cryptocurrencies in an Emerging Market
Authors: Maurice Omane-Adjepong
Imhotep Paul Alagidede
Publication date: 08-05-2020
Publisher: Springer Japan
Published in: Asia-Pacific Financial Markets / Issue 4/2020
Print ISSN: 1387-2834
Electronic ISSN: 1573-6946
DOI: https://doi.org/10.1007/s10690-020-09306-4

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