REVISITING THE DYNAMIC CONNECTEDNESS, SPILLOVER AND HEDGING OPPORTUNITIES AMONG CRYPTOCURRENCY, COMMODITIES, AND ISLAMIC STOCK MARKETS

Abstract

The study investigates the dynamic interconnections and opportunities for hedging among cryptocurrency, commodity, and Islamic stock markets using DCC-GARCH and Spillover connectedness models. Using daily data covering the Russia-Ukraine war and COVID-19 outbreak from December 1, 2019 to April 15, 2022, we document weak and frequently negative correlation between Bitcoin and Islamic stock markets. Thus, Bitcoin could be viewed as a haven from Islamic stock market losses. The results also indicate that Bitcoin’s diversification benefits are normally steady and increase considerably during turbulence. Furthermore, the net return spillovers from the Bitcoin market remain above zero during most of the study period. We also find that utilizing Bitcoin as a hedge during the COVID-19 pandemic phase leads to higher expenses. The outcomes of this investigation are expected to carry substantial ramifications for Indonesian investors and portfolio managers who adhere to Shariah law since they will enable them to comprehend the advantages of diversifying portfolios across various periods of stock holding or investment horizons.