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ABSTRACT
This paper aims to investigate the impacts of the COVID-19 pandemic and Russia-Ukraine war on the interconnectedness between the US and China stock markets, major cryptocurrency and commodity markets using the wavelet coherence approach over the period from January 1 2016 to April 18 2022. The aim is to understand how the COVID-19 pandemic and the Russia-Ukraine war have affected the hedging efficiency of volatile crypto-currencies and gold. Wavelet coherency analysis unveils perceptual differences between the short-term and longer-term market reactions. In the short-run, we find strong co-movements during the first and second waves of the pandemic. During the first wave, longer-term investors were driven by the belief of future pandemic demise. They make use of time diversification that results in positive returns. During the Russia-Ukraine war, S&P 500 leads Bitcoin, BNB, and Ripple whereas Ethereum leads S&P 500 and SSE.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. Vidal-Tomàs (2022) analysed the adequacy of data in the cryptocurrency literature. He concluded that USD (cross-rate) databases (Coinmarketcap, Coingecko, BraveNewCoin) are the best options to collect cryptocurrency data.
2. When we rely on wavelets for feature extraction purposes, opting for Morlet wavelet, with ω0 = 6, is the best option thanks to its optimal time and frequency localisation (to compare the different wavelet filters and frequencies, refer to Aguiar-Conraria et al., 2008; Grinsted et al., 2004; Torrence & Compo, 1998).