Return and volatility connectedness between agricultural tokens and us equity sectors

Ali, aShoaib; Yousfi, Mohamed; Chughtai, Sumayya; Min Du, Anna

Abstract

This study investigates the return and volatility interconnectedness between emerging digital assets, specifically agricultural tokens, and U.S. equity sectors using the TVP-VAR model. Analyzing data from August 7, 2020, to January 2, 2024, the findings indicate modest interconnections between agricultural tokens and U.S. sectors, with time-varying behavior. Notably, return interconnectedness is generally stronger than volatility, except at the sample period's outset, where volatility dominates. Return spillovers predominantly drive the connectedness system, though agricultural tokens uniquely act as net recipients of both return and volatility spillovers, while U.S. equity sectors mainly transmit spillovers. Optimal portfolio analysis, utilizing portfolio weights and hedge ratios, reveals that incorporating agricultural tokens offers portfolio diversification benefits and enhances hedging performance. Investors are advised to frequently adjust portfolios to maximize diversification and hedging gains. These findings provide significant portfolio implications for policymakers, market participants, and investors.

Citation

Ali, A., Yousfi, M., Chughtai, S., & Min Du, A. (2024). Return and volatility connectedness between agricultural tokens and us equity sectors. Research in International Business and Finance, 72(Part B), 102544. https://doi.org/10.1016/j.ribaf.2024.102544

• Journal Article Type: Article
• Acceptance Date: Aug 22, 2024
• Online Publication Date: Aug 27, 2024
• Publication Date: 2024-10
• Deposit Date: Sep 2, 2024
• Publicly Available Date: Sep 2, 2024
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 72
• Issue: Part B
• Pages: 102544
• DOI: https://doi.org/10.1016/j.ribaf.2024.102544
• Keywords: Agricultural tokens, US sectors, TVP-VAR model, Connectedness, Portfolio analysis