Interlinkages between Bitcoin, green financial assets, oil, and emerging stock markets

Kuo-Shing Chen; Kuo-Shing Chen

doi:10.3934/DSFE.2024006

Data Science in Finance and Economics

2024, Volume 4, Issue 1: 160-187. doi: 10.3934/DSFE.2024006

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Research article

Interlinkages between Bitcoin, green financial assets, oil, and emerging stock markets

Kuo-Shing Chen ^,

Department of Accounting, Ming Chuan University, 250 Zhong Shan N. Rd., Sec. 5, Taipei 111, Taiwan

Received: 21 December 2023 Revised: 05 March 2024 Accepted: 10 March 2024 Published: 25 March 2024
JEL Codes: B23, C32, G10, Q4

In this article, we describe the novel properties of Bitcoin and green financial assets and empirically examine the connectedness between Bitcoin and two green financial assets (i.e., carbon emissions, green bonds) and two representative markets of conventional assets (i.e., oil and emerging stock). This study also analyzes whether Bitcoin, carbon, green bonds, oil, and emerging stock assets can hedge against any market turbulence. From observed findings, Bitcoin was not an effective substitute for green bond assets. Thus, Bitcoin is not a valuable hedge instrument to substitute green bonds to mitigate climate risks. More precisely, the findings of the study show that carbon assets outperform emerging stock assets amidst the COVID-19 crisis, while the stock markets incurred significant losses. Crucially, the innovative findings also played an important role for policymakers interested in decarbonizing the crypto-assets.
- Bitcoin mining,
- carbon emissions,
- climate changes,
- green financial assets,
- portfolio optimization,
- wavelet coherence
Citation: Kuo-Shing Chen. Interlinkages between Bitcoin, green financial assets, oil, and emerging stock markets[J]. Data Science in Finance and Economics, 2024, 4(1): 160-187. doi: 10.3934/DSFE.2024006

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Abstract

In this article, we describe the novel properties of Bitcoin and green financial assets and empirically examine the connectedness between Bitcoin and two green financial assets (i.e., carbon emissions, green bonds) and two representative markets of conventional assets (i.e., oil and emerging stock). This study also analyzes whether Bitcoin, carbon, green bonds, oil, and emerging stock assets can hedge against any market turbulence. From observed findings, Bitcoin was not an effective substitute for green bond assets. Thus, Bitcoin is not a valuable hedge instrument to substitute green bonds to mitigate climate risks. More precisely, the findings of the study show that carbon assets outperform emerging stock assets amidst the COVID-19 crisis, while the stock markets incurred significant losses. Crucially, the innovative findings also played an important role for policymakers interested in decarbonizing the crypto-assets.

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