A time–frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets
Source of Publication
Journal of Behavioral and Experimental Finance
© 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.
Causality, Covid-19 panic, Cross-currency hedge strategies, Cryptocurrencies, Currency markets, Lead–lag effects, Wavelet coherence, Wavelet phase difference
Umar, Zaghum and Gubareva, Mariya, "A time–frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets" (2020). All Works. 302.
Indexed in Scopus
Open Access Type
Green: A manuscript of this publication is openly available in a repository