TY - JOUR
T1 - Performance Analysis of Gold- and Fiat-Backed Cryptocurrencies
T2 - Risk-Based Choice for a Portfolio
AU - Irfan, Muhammad
AU - Rehman, Mubeen Abdur
AU - Nawazish, Sarah
AU - Hao, Yu
N1 - Publisher Copyright:
© 2023 by the authors.
PY - 2023/2
Y1 - 2023/2
N2 - This study aims to investigate the performance and behavior of fiat- and gold-backed cryptocurrencies to support stakeholders through the preparation of a portfolio from 1 January 2021 to 30 June 2022. Moreover, while searching for a hedge or a diversifier to construct a less risky portfolio with handsome returns, the prices of fiat-backed cryptocurrencies report high fluctuation during the sample period. ARIMA-EGARCH models have been employed to examine the volatile behavior of these cryptocurrencies. The empirical results are mixed as Bitcoin has been highly volatile during the economic recession. Due to its volatility, investors seek a safe haven. Ripple, on the other hand, shows low risk compared to Bitcoin. The results further reveal that PAX gold is more volatile than PM gold, while Bitcoin, being a highly traded cryptocurrency, is significantly correlated to other cryptocurrencies. The implications of this research showing the volatility of gold- and fiat-backed cryptocurrencies are equally important to stakeholders, such as investors, and policymakers.
AB - This study aims to investigate the performance and behavior of fiat- and gold-backed cryptocurrencies to support stakeholders through the preparation of a portfolio from 1 January 2021 to 30 June 2022. Moreover, while searching for a hedge or a diversifier to construct a less risky portfolio with handsome returns, the prices of fiat-backed cryptocurrencies report high fluctuation during the sample period. ARIMA-EGARCH models have been employed to examine the volatile behavior of these cryptocurrencies. The empirical results are mixed as Bitcoin has been highly volatile during the economic recession. Due to its volatility, investors seek a safe haven. Ripple, on the other hand, shows low risk compared to Bitcoin. The results further reveal that PAX gold is more volatile than PM gold, while Bitcoin, being a highly traded cryptocurrency, is significantly correlated to other cryptocurrencies. The implications of this research showing the volatility of gold- and fiat-backed cryptocurrencies are equally important to stakeholders, such as investors, and policymakers.
KW - ARIMA-EGARCH model
KW - fiat-backed cryptocurrencies
KW - gold-backed cryptocurrencies
KW - volatility
UR - https://www.scopus.com/pages/publications/85148739599
U2 - 10.3390/jrfm16020099
DO - 10.3390/jrfm16020099
M3 - Article
AN - SCOPUS:85148739599
SN - 1911-8066
VL - 16
JO - Journal of Risk and Financial Management
JF - Journal of Risk and Financial Management
IS - 2
M1 - 99
ER -