The impact of COVID-19-related media coverage on the return and volatility connectedness of cryptocurrencies and fiat currencies

Abstract

This research explores the impact of COVID-19-related media coverage on the dynamic return and volatility connectedness of the three dominant cryptocurrencies (Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP)) and the fiat currencies of the euro, GBP and Chinese yuan. The sample period covers the first and second devasting waves of the COVID-19 pandemic crisis and ranges from January 1, 2020, to December 31, 2020. The dynamic return and volatility connectedness measures are estimated using the time varying parameter-VAR approach. Our return connectedness analysis shows that the media coverage index (only before the first wave) and the cryptocurrencies are the net transmitters of shocks while the fiat currencies are the net receivers of shocks. Similar results are obtained in terms of volatility, except for the euro, which shows a clear net receiver profile in January and February. This fiat currency (the euro) became a net transmitter in March and during the first wave of the COVID-19 crisis, which possibly shows the virulence of the pandemic on the European continent. Moreover, the most relevant differences between the net dynamic (return and volatility) connectedness of these two groups of currencies are focused on the beginning of the sample period, just before the first wave of the SARS-CoV-2 pandemic crisis, although some differences are observed during the first and second waves of the coronavirus outbreak.

COVID-19 related media sentiment and the yield curve of G-7 economies

“…In this respect, many of the existing studies focus their examination on the connectedness and risk spillovers between European Union countries ( Antonakakis and Vergos, 2013 , Claeys and Vasicek, 2014 , Fernández-Rodríguez et al, 2016 , Ehrmann and Fratzscher, 2017 , Greenwood-Nimmo et al, 2017 , BenSaïda, 2018 , Chatziantoniou and Gabauer, 2021 , Umar et al, 2019 ). In addition, a plethora of studies have explored connectedness between commodities (e.g., Antonakakis and Kizys, 2015 , Yoon et al, 2019 , Umar et al, 2019a , Umar et al, 2019b , Balcilar et al, 2021 ), cryptocurrency markets (e.g., Koutmos, 2018 , Antonakakis et al, 2019 , Ji et al, 2019 , Zieba et al, 2019 , Umar et al, 2021 , Aharon et al, 2021 ), and asymmetric connectedness (e.g., Baruník et al, 2016 , Baruník et al, 2017 , BenSaïda, 2019 ). We seek to contribute to these studies by examining connectedness during market crises (e.g., Alter and Beyer, 2014 , Greenwood-Nimmo et al, 2017 ), and more specifically, to several studies examining connectedness and contagious effects during COVID-19 (e.g., Adekoya and Oliyide, 2020 , Gubareva and Umar, 2020 , Adekoya et al, 2020 , Bissoondoyal-Bheenick et al, 2020 , Corbet et al, 2020 , Umar and Gubareva, 2020 , Umar and Gubareva, 2021 , Umar and Gubareva, 2021a ).…”

How resilient are Islamic financial markets during the COVID-19 pandemic?

“…The unemployment rate in the United States jumped from 3.7% to 14.8% in the early two months of the pandemic ( Yarovaya et al, 2021 ). In the wake of COVID-19, many studies have observed the repercussions of the pandemic to the financial markets (see, e.g., Sharif et al, 2020 ; Corbet et al, 2020 ; Akhtaruzzaman et al, 2020 ; Hasan et al, 2021b ; Hasan et al, 2021c ; Shafiullah et al, 2021 ; Zaremba et al, 2021 ; Umar et al, 2021b ). It is also assumed that this pandemic's financial losses would be much more than the earlier crises such as the Great Depression (1930), Black Monday (1987), Asian Financial Crisis (1997), and 2008 GFC ( Sharif et al, 2020 ; Ji et al, 2020 ).…”

Impact of COVID-19 effective reproductive rate on cryptocurrency

“…Umar and Gubareva ( 2020 ) conducted a time–frequency analysis of the volatility of CC markets, which is induced by the pandemic. Umar et al ( 2021a , b ) studied the impact of media coverage of the pandemic on the return and volatility of CCs. Sahoo ( 2021 ) explored the linear and nonlinear causal relationship between COVID-19 and CC markets.…”

“…Furthermore, the earlier studies reviewed did not consider the magnitude of the pandemic but rather considered the relationship between the market and the pandemic (e.g., Kristoufek 2020 ; Yousaf and Ali 2021 ), the relationship between media and CCs (e.g., Umar et al 2021a , b ), or the time series (Umar and Gubareva 2020 ). The current study expands our knowledge of the literature by including an indicator for the spread of the pandemic.…”