Investigating the diversifying or hedging nexus of cannabis cryptocurrencies with major digital currencies

This paper sets out to explore the nexus between cryptocurrencies connected to cannabis production and the three highest capitalization digital currencies. Daily data are employed that cover the period 26 October 2017–3 January 2020. Generalized autoregressive schemes in the form of GARCH, EGARCH, T...

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Bibliographic Details
Published inDecisions in economics and finance Vol. 44; no. 2; pp. 845 - 861
Main Author Kyriazis, Nikolaos A.
Format Journal Article
LanguageEnglish
Published Cham Springer International Publishing 01.12.2021
Springer Nature B.V
Subjects
Cannabis
Digital currencies
Econometrics
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Hedging
Management
Marijuana
Operations Research/Decision Theory
Public Finance
Scrutiny
Thresholds
Volatility
G11
Bitcoin
Ethereum
Diversifying
Ripple
Hedging
G15
Cannabis cryptocurrency
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Summary:This paper sets out to explore the nexus between cryptocurrencies connected to cannabis production and the three highest capitalization digital currencies. Daily data are employed that cover the period 26 October 2017–3 January 2020. Generalized autoregressive schemes in the form of GARCH, EGARCH, TGARCH and GJR-GARCH are adopted in order to study volatility characteristics. Findings reveal that GARCH and GJR-GARCH specifications are most appropriate in the majority of cases. This reveals the existence of thresholds in the volatility of cannabis cryptocurrencies when examining their nexus with major digital currencies. This renders them riskier but also more attractive to speculators. Thereby, they abide by the overall character of such innovative forms of liquidity and investment. Overall, evidence indicates that Bitcoin presents medium to strong positive linkage with cannabis cryptocurrencies while Ripple is the most weakly connected to them. Thereby, none of the major digital currencies under scrutiny can serve as efficient hedger against cannabis cryptocurrencies.
ISSN:1593-8883
1129-6569
DOI:10.1007/s10203-021-00356-5