Co-movements between Bitcoin and Gold: A wavelet coherence analysis

Sang Hoon Kang (1, 2) , Ron Mciver (2) , Jose Arreola Hernandez (3)

1 PNU - Pusan National University
2 University of South Australia [Adelaide]
3 ESC [Rennes] - ESC Rennes School of Business

In this paper, we use dynamic conditional correlations (DCCs) and wavelet coherence to examine the hedging and diversification properties of gold futures vis-à-vis Bitcoin prices. Our research aims to reveal whether the bubble patterns of behavior in gold futures prices can be used to hedge against the bubble behavior in the Bitcoin market in the short-term, and vice versa; as well as whether each can be used to manage and hedge overall market and sector downside risk of the other asset/commodity. We find evidence of volatility persistence, causality, and phase differences between Bitcoin and gold futures prices. Contagion is observed to increase during the European sovereign debt crisis. Wavelet coherence results indicate a relatively high degree of co-movement across the 8–16 weeks frequency band between Bitcoin and gold futures prices for the 2012–2015 time period.

Mots clés: Co-movement; Wavelet coherence analysis; Causality; Gold futures; Bitcoin

Domaines: Économie et finance quantitative [q-fin]

Sang Hoon Kang, Ron Mciver, Jose Arreola Hernandez. Co-movements between Bitcoin and Gold: A wavelet coherence analysis. Physica A: Statistical Mechanics and its Applications, 2019, 536, pp.120888. ⟨10.1016/j.physa.2019.04.124⟩. ⟨hal-02468160⟩