Connectedness among diverse financial assets: Evidence from cryptocurrency uncertainty indices

Abstract

This study examines the impact of cryptocurrency uncertainty indices on green bonds, currency, and commodity markets by using weekly data from January 1, 2014, to December 30, 2022. The study analyzes such relationships employing the time-varying robust Granger-Causality test coupled with the TVP-VAR-DY approach. The empirical findings unfold the heterogeneous effects of uncertainty indices toward diverse financial instruments pronounced during financial or economic turbulence. The DY approach indicates that total connectedness among financial assets varies significantly over time. The green bond market is the net receiver, while ishares Global Clean Energy ETF (ICLN) and VanEck Low Carbon Energy ETF (SMOG) indices transmit the shocks for the whole period. The findings suggest that holdings in the green bond market after the health crisis offer greater hedging opportunities to investors. The results have significant ramifications for financing, hedging, and policymaking.