Title

A time–frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets

Document Type

Article

Source of Publication

Journal of Behavioral and Experimental Finance

Publication Date

12-1-2020

Abstract

© 2020 Elsevier B.V. We apply wavelet analyses to examine the impact of the Covid-19 fueled panic on the volatility of major fiat and cryptocurrency markets during January–May, 2020. There is high coherence between moves of the Coronavirus Panic Index and the price moves in Euro, British pound, and Renminbi currencies as well as movements of the Bloomberg Galaxy Crypto Index. The main conclusions for each index pair are quite similar and corroborate with our thesis that the cross-currency hedge strategies, which could work under normal market conditions, are likely to fail during the periods of global crisis, e.g., such as the Covid-19 pandemic. However, we document some important differences in currency markets behavior, which potentially could be used to design effective cross-currency hedges capable of withstanding adverse impacts of global financial and economic turmoil. Our findings could be of use for future development of financial policies and currency markets regulation rules.

ISSN

2214-6350

Publisher

Elsevier B.V.

Volume

28

First Page

100404

Last Page

100404

Disciplines

Business

Keywords

Causality, Covid-19 panic, Cross-currency hedge strategies, Cryptocurrencies, Currency markets, Lead–lag effects, Wavelet coherence, Wavelet phase difference

Scopus ID

85091975150

Indexed in Scopus

yes

Open Access

yes

Open Access Type

Green: A manuscript of this publication is openly available in a repository

Share

COinS