Volatility interdependencies of cryptocurrencies, gold, oil, and US stocks: quantile connectedness analysis with intraday data

Abstract

The financial market is constantly affected by extreme events, such as the COVID-19 pandemic and the Russia-Ukraine war, which have significantly impacted commodity prices and market conditions. To better understand the behaviour of prices in different market situations, particularly at the bull and bear market states, this study investigates the interdependencies of volatility between cryptocurrencies, gold, oil, and US stocks by employing the quantile dynamic connectedness method and computing the Net total connectedness (NET) and the Total Connectedness Index (TCI) measures for bear, bull, and normal market situations. As a differential, it used intraday data from 2018 to 2022 to characterise relationships among these market situations. The NET measure indicates that Ethereum and Bitcoin are net transmitters of shocks in different quantile values. At the same time, Brent, gold, and SP500 showed to be net shock receivers in most situations, except for gold in quantiles 0.6–0.7 and 0.95 and SP500 in quantiles 0.9–0.95. Further, shocks are not transmitted between Bitcoin and Ethereum at any phase of the market. Regarding TCI, the results show that the different markets are strongly connected in extreme situations, mainly in the bull market. These findings into the distinct behaviors under extreme quantiles provide valuable implications for portfolio diversification and risk management strategies.