Risk transmissions between bitcoin and traditional financial assets during the COVID-19 era: The role of global uncertainties

Elsayed A. H. , GÖZGÖR G., Lau C. K. M.

INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, vol.81, 2022 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 81
  • Publication Date: 2022
  • Doi Number: 10.1016/j.irfa.2022.102069
  • Journal Indexes: Social Sciences Citation Index, Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit
  • Keywords: Return connectedness, Risk transmissions, Bitcoin, Financial assets, Global uncertainty measures, SAFE HAVEN, DYNAMIC CONNECTEDNESS, VOLATILITY, CRYPTOCURRENCY, HEDGE, RETURNS, TIME, GOLD


This paper examines return and volatility connectedness between Bitcoin, traditional financial assets (Crude Oil, Gold, Stocks, Bonds, and the United States Dollar-USD), and major global uncertainty measures (the Economic Policy Uncertainty-EPU, the Twitter-based Economic Uncertainty-TEU, and the Volatility Index-VIX) from April 29, 2013, to June 30, 2020. To this end, the Time-Varying Parameter Vector Autoregression (TVP-VAR) model, dynamic connectedness approaches, and network analyses are used. The results indicate that total spillover indices reached unprecedented levels during COVID-19 and have remained high since then. The evidence also confirms the high return and volatility spillovers across markets during the COVID-19 era. Regarding the return spillovers, Gold is the centre of the system and demonstrates the safe heaven properties. Bitcoin is a net transmitter of volatility spillovers to other markets, particularly during the COVID-19 period. Furthermore, the causality-in-variance Lagrange Multiplier (LM) and the Fourier LM tests' results confirm a unidirectional volatility transmission from Bitcoin to Gold, Stocks, Bonds, the VIX and Crude Oil. Interestingly the EPU is the only global factor that causes higher volatility in Bitcoin. Several potential implications of the results are also discussed.