Risk substitution in cryptocurrencies: Evidence from BRICS announcements

John W. Goodell; Ilan Alon; Laura Chiaramonte; Alberto Dreassi; Andrea Paltrinieri; Stefano Piserà

doi:10.1016/j.ememar.2022.100938

Risk substitution in cryptocurrencies: Evidence from BRICS announcements

John W. Goodell, Ilan Alon, Laura Chiaramonte, Alberto Dreassi, Andrea Paltrinieri, Stefano Piserà

Department of Economics and Business Administration

Research output: Contribution to journal › Article › peer-review

17 Scopus citations

Abstract

We investigate the impact of BRICS regulatory announcements on cryptocurrency volatilities and returns. Results evidence risk substitutions after announcements moving from ETH, XRP and LTC to BTC and vice versa, with BTC having volatility reactions to regulatory announcements that differ from those of other cryptocurrencies. Bootstrap quantile regression indicates a stronger detrimental impact of announcements when BTC is currently manifesting lower volatility and higher daily returns. Robustness checks confirm our findings, as well as evidence that the cryptocurrencies in our sample are considerably more reactive to BRICS announcements than US Fed announcements, suggesting important linkages between emerging markets and cryptocurrencies.

Original language	English
Article number	100938
Journal	Emerging Markets Review
Volume	54
DOIs	https://doi.org/10.1016/j.ememar.2022.100938
State	Published - Mar 2023

Keywords

BRICS
Bitcoin
Cryptocurrencies
Emerging markets
Ethereum
FED
Litecoin
Regulatory announcements
Ripple

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10.1016/j.ememar.2022.100938

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title = "Risk substitution in cryptocurrencies: Evidence from BRICS announcements",

abstract = "We investigate the impact of BRICS regulatory announcements on cryptocurrency volatilities and returns. Results evidence risk substitutions after announcements moving from ETH, XRP and LTC to BTC and vice versa, with BTC having volatility reactions to regulatory announcements that differ from those of other cryptocurrencies. Bootstrap quantile regression indicates a stronger detrimental impact of announcements when BTC is currently manifesting lower volatility and higher daily returns. Robustness checks confirm our findings, as well as evidence that the cryptocurrencies in our sample are considerably more reactive to BRICS announcements than US Fed announcements, suggesting important linkages between emerging markets and cryptocurrencies.",

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author = "Goodell, {John W.} and Ilan Alon and Laura Chiaramonte and Alberto Dreassi and Andrea Paltrinieri and Stefano Piser{\`a}",

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AU - Goodell, John W.

AU - Alon, Ilan

AU - Chiaramonte, Laura

AU - Dreassi, Alberto

AU - Paltrinieri, Andrea

AU - Piserà, Stefano

PY - 2023/3

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AB - We investigate the impact of BRICS regulatory announcements on cryptocurrency volatilities and returns. Results evidence risk substitutions after announcements moving from ETH, XRP and LTC to BTC and vice versa, with BTC having volatility reactions to regulatory announcements that differ from those of other cryptocurrencies. Bootstrap quantile regression indicates a stronger detrimental impact of announcements when BTC is currently manifesting lower volatility and higher daily returns. Robustness checks confirm our findings, as well as evidence that the cryptocurrencies in our sample are considerably more reactive to BRICS announcements than US Fed announcements, suggesting important linkages between emerging markets and cryptocurrencies.

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Risk substitution in cryptocurrencies: Evidence from BRICS announcements

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