Does the Cryptocurrency Index Provide Diversification Opportunities With MSCI World Index and MSCI Emerging Markets Index?

Abstract

The study is extending the ongoing discussion on Bitcoin as a diversification asset with the stock market. Some studies analysed cryptocurrencies as a diversification asset, and few challenged the same. During times of turbulence, it is crucial to gauge further diversification opportunities. Henceforth, the study revisits the opportunities of hedging and diversification with the crypto market from a broader perspective. The study captures the spillover from MSCI World Index and MSCI Emerging Markets Index to Bitwise 10 Crypto Index Fund (BITW). The study has contributed methodologically to the existing literature by applying DY with symmetric and asymmetric dynamic conditional volatility models. The results provide in-depth shreds of evidence that BITW is insulated, neither taking volatilities from other countries nor contributing to the volatilities of other countries. The study provides insight to policymakers and investors.