Risk substitution in cryptocurrencies: Evidence from BRICS announcements |
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| Institution: | 1. Department of Finance, College of Business, University of Akron, Akron, OH 44325, United States of America;2. Department of Business Administration, University of Verona, Verona 37100, Italy;3. Department of Economics, Business, Mathematics and Statistics, University of Trieste, Trieste 34123, Italy;4. Department of Economics and Business Administration, Università Cattolica del Sacro Cuore, Milan 20123, Italy |
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| Abstract: | We investigate the impact of BRICS regulatory announcements on cryptocurrency volatilities and returns. Results evidence risk substitutions after announcements moving from ETH, XRP and LTC to BTC and vice versa, with BTC having volatility reactions to regulatory announcements that differ from those of other cryptocurrencies. Bootstrap quantile regression indicates a stronger detrimental impact of announcements when BTC is currently manifesting lower volatility and higher daily returns. Robustness checks confirm our findings, as well as evidence that the cryptocurrencies in our sample are considerably more reactive to BRICS announcements than US Fed announcements, suggesting important linkages between emerging markets and cryptocurrencies. |
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