Time-Varying Characterization Of Risk Contagion Between Bitcoin And Gold Markets

Since 2018,a series of risk events such as Sino US trade frictions,the COVID-19,and the Russia Ukraine conflict have occurred frequently.As a traditional safe-haven asset,the market allocation demand and attention of gold have been increasing.In 2019,the gold price continuously broke through the integer threshold of US $1400 and US$1500,and continuously set a record high.On the other hand,Bitcoin also ushered in rapid development of market value after 2017.In 2021,the price of Bitcoin reached a high of US $60000.Bitcoin and gold have many commonalities,such as scarcity,limited stock,and slowing growth.As the representatives of new and old currencies,both Bitcoin and gold are affected by inflation,interest rate and money supply in terms of price drivers,and the market accepts both as hedging diversified asset allocation,so they have theoretical and logical basis in cross-asset linkage.In the theoretical research of cross-asset linkage,it focuses on spillover effect,risk contagion,investment transfer,etc.It has been found that there are yield and volatility spillover effects in Bitcoin and gold markets,but there is little research on the risk contagion and investment transfer of the two under risk events.Therefore,this thesis applies the quantile regression method to study the impact of Bitcoin on the yield of gold market at different development stages,and constructs the DCC-GARCH model and event analysis method to study the dynamic correlation between Bitcoin market and gold market,as well as whether there is market infection and investment transfer between Bitcoin and gold market under the impact of risk events.The empirical results show that there is a positive correlation between the yield of Bitcoin and the yield of gold,and the impact is characterized by stages.Before 2017,Bitcoin basically had no impact on the gold market at the initial stage of its development,and after the rapid development of Bitcoin in 2017,it had a positive impact on the gold market.Through the analysis of four typical financial market risk events,it is found that gold and Bitcoin have investment transfer effects during the Cyprus crisis in 2013,Sino US trade friction in 2018,and risk contagion effects during the Brexit referendum in 2016 and the COVID-19 epidemic in 2020.In general,Bitcoin and gold are also used as hedging asset allocation.There is a positive correlation between the yield of Bitcoin and the yield of gold.There is a significant volatility spillover between the two,and the relationship between the two shows different dynamic characteristics at different stages.Based on the empirical results,the following policy recommendations are put forward:first,establish and strengthen the concept of portfolio investment,and use the concept of asset allocation to achieve an effective balance of income,risk and security;Second,correctly understand the virtual currency and carry out asset allocation in accordance with laws and regulations;Third,maintain the level of leverage reasonably and make full use of leverage tools to improve the level of income;Fourth,establish and improve the application of arbitrage concept,and strive for excess returns through the application of arbitrage concept.