Anecdote of Asymmetry: Analysis of Dependence Structure, Hedging Strategies Between Green Financial Assets and Green Crypto Assets

Abstract

Cryptocurrency (crypto) markets have changed the investment landscape for many; however, they have started feeling the heat of the growing climate change awareness and are being prompted to shift towards green financial assets or clean/green cryptos. Climate change and sustainability have become an essential part of every discussion for businesses and investors. This study attempts to discover the connectedness between green financial assets and green cryptos. This paper builds upon a novel approach of copula analysis to shed light on the tail dependencies of the two asset classes. The findings provide interesting insights for investors to consider these two classes for portfolio diversification benefits or their hedging strategies, especially during a crisis period like COVID-19. The results indicate that the two asset classes exhibit distinct interdependencies, provide diversification and risk management opportunities, and behave differently during a crisis, and therefore present hedging and diversification opportunities to investors despite both asset classes being green.