RESEARCH ARTICLE
What drives the return and volatility spillover between DeFis and cryptocurrencies?
Ata Assaf,
Ender Demir,
Oguz Ersan,
Corresponding Author
Ata Assaf
Faculty of Business and Management, University of Balamand, Tripoli, Lebanon
Correspondence
Ata Assaf, Faculty of Business and Management, University of Balamand, P.O.Box: 100, Tripoli, Lebanon.
Email: [email protected]
Search for more papers by this authorEnder Demir
Department of Business Administration, School of Social Sciences, Reykjavik University, Reykjavik, Iceland
Korea University Business School, Korea University, Seoul, South Korea
Search for more papers by this authorOguz Ersan
Department of International Trade and Finance, Faculty of Economics, Administrative and Social Sciences, Kadir Has University, Istanbul, Turkey
Search for more papers by this authorAta Assaf,
Ender Demir,
Oguz Ersan,
Corresponding Author
Ata Assaf
Faculty of Business and Management, University of Balamand, Tripoli, Lebanon
Correspondence
Ata Assaf, Faculty of Business and Management, University of Balamand, P.O.Box: 100, Tripoli, Lebanon.
Email: [email protected]
Search for more papers by this authorEnder Demir
Department of Business Administration, School of Social Sciences, Reykjavik University, Reykjavik, Iceland
Korea University Business School, Korea University, Seoul, South Korea
Search for more papers by this authorOguz Ersan
Department of International Trade and Finance, Faculty of Economics, Administrative and Social Sciences, Kadir Has University, Istanbul, Turkey
Search for more papers by this authorAbstract
In this paper, we study the return and volatility connectedness between cryptocurrencies and DeFi Tokens, considering the impact of different uncertainty indices on their connectivity. Initially, we estimate a TVP-VAR model to obtain the total connectedness between the two markets. We find that returns on the cryptocurrencies transmit significantly larger shocks and, thus, are responsible for most variations in the majority of DeFis' returns. Then, to analyse the impact of uncertainty on total return and volatility connectedness, we use four factors, namely, Economic Policy Uncertainty (EPU), The Chicago Board Options Exchange Volatility Index (VIX), Infectious Disease Equity Market Volatility Tracker (ID-EMV) and Geopolitical Risks (GPR). We find that except for geopolitical risks, all three measures have a positive impact on return and volatility connectedness, while GPR exerts a negative impact. Finally, we provide implications for researchers, market participants and policymakers.
CONFLICT OF INTEREST STATEMENT
There is no conflict of interest.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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