Qabhobho, Thobekile; Mpuku, Cwayi a; Anyikwa, Izunna; Phi i, And ew
A icle
Tail-spillo e e ec s be ween A ican cu encies, bi coin,
gold and oil du ing wo ecen black swan e en s
Cogen Business & Managemen
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Qabhobho, Thobekile; Mpuku, Cwayi a; Anyikwa, Izunna; Phi i, And ew (2024) :
Tail-spillo e e ec s be ween A ican cu encies, bi coin, gold and oil du ing wo ecen black swan
e en s, Cogen Business & Managemen , ISSN 2331-1975, Taylo & F ancis, Abingdon, Vol. 11, Iss. 1,
pp. 1-22,
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Tail-spillo e effec s be ween A ican cu encies,
bi coin, gold and oil du ing wo ecen black swan
e en s
Thobekile Qabhobho, Cwayi a Mpuku, Izunna Anyikwa & And ew Phi i
To ci e his a icle: Thobekile Qabhobho, Cwayi a Mpuku, Izunna Anyikwa & And ew
Phi i (2024) Tail-spillo e effec s be ween A ican cu encies, bi coin, gold and oil du ing
wo ecen black swan e en s, Cogen Business & Managemen , 11:1, 2343411, DOI:
10.1080/23311975.2024.2343411
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Cogen Business & ManageMen
2024, VoL. 11, no. 1 , 2343411
Tail-spillo e e ec s be ween A ican cu encies, bi coin, gold and
oil du ing wo ecen black swan e en s
hobekile Qabhobho, cwayi a Mpuku, izunna anyikwa and and ew Phi i
Depa men o economics, Facul y o Business and economic s udies, nelson Mandela uni e si y, Po elizabe h, sou h a ica
ABSTRACT
since he onse o he cOViD-19 pandemic, a ican cu encies, c yp ocu encies, and
commodi y ma ke s ha e unde gone signi ican luc ua ions, displaying a - ail
p ope ies ha lies a he ou e ends o he no mal p obabili y cu e. he ecen
Russia-Uk aine wa has u he dis up ed hese ma ke s, gene a ing conside able in e es
among academics and p ac i ione s. Ou s udy del es in o ail-end e u ns and ola ili y
connec edness be ween Bi coin, c ude oil, gold, and ou a ican cu encies amids he
cOViD-19 and Russia-Uk aine wa . employing a quan ile ec o au o eg essi e (QVaR)
app oach, we analyze ail-end spillo e e ec s be ween ma ke s om 4 no embe
2019, o 7 sep embe 2022. Ou indings e eal heigh ened connec edness a he
quan ile ends o co-mo emen s, wi h le - ail spillo e s being mo e p onounced o
e u ns, while igh - ail spillo e s domina e o ola ili y. Bi coin, and o a lesse ex en
gold and oil, eme ge as e ec i e ail-ended hedges o he egyp ian Pound and
nige ian nai a bu no o o he a ican cu encies like he alge ian Dina and sou h
a ican Rand. consequen ly, use s o egyp ian and nige ian cu encies in in e na ional
inancial ma ke s can seek hedging oppo uni ies in adi ional c yp ocu encies and
commodi ies du ing ecen Black swan e en s, unlike hose using sou h a ican and
alge ian cu encies. addi ionally, ou esul s sugges limi ed di e si ica ion bene i s
associa ed wi h (i) cu encies linked o oil-expo ing o oil-impo ing coun ies, (ii)
cu encies linked o sha iah-complian inancial sys ems, bu do indica e di e si ica ion
bene i s in high-in la ion en i onmen s. hese indings hold ele ance o in es o s
seeking imp o ed hedging s a egies agains a ican cu ency isk and o a ican
policymake s aiming o enhance in a-con inen al ade, o eign di ec in es men , and
c oss-bo de business expansions.
1. In oduc ion
‘Black swans’ a e ex eme c isis e en s ha a e a e and unp edic able wi h ca as ophic consequences
ha ex end ac oss commodi y and inancial ma ke s ( aleb, 2007). such ex eme c isis e en s a e exem-
pli ied by he ecen cOViD-19 pandemic and he ongoing Russia-Uk aine con lic which ha e esul ed
in unp eceden ed mo emen s in he p ices o inancial asse s a ound he globe. Fo ins ance, ollowing
he pandemic, gold and Bi coin hi eco d high p ices o $2,076 and $65,000 on augus 2020 and
no embe 2021, espec i ely, whe eas Bi coin mo e ecen ly hi a 2-yea low du ing he ongoing
Russia-Uk aine con lic . also, c ude oil expe ienced his o ic low p ices due o he pandemic and geopo-
li ical ensions be ween Russia and saudi a abia in ap il 2020 (a i e al., 2022) and i is cu en ly expe-
iencing a 14-yea high amid he ongoing Russia-Uk aine wa . simila ly, s ock p ices in mo e de eloped
equi y ma ke s eached eco d low alues du ing he ea ly wa e o he pandemic in Ma ch–ap il 2020
which igge ed eme gency ‘ci cui b eake s’ ha p e en ed he o al collapse o equi y ma ke s (Ozkan,
2021; li e al., 2021), whe eas se e al eme ging and indus ialized s ock ma ke s eco ded his o ic high
p ices leading o he ‘ma ke bubble’ o Decembe 2021 and he subsequen ‘2022 s ock ma ke decline’
(kuang & Douady, 2022).
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT and ew Phi i phi icand [email protected] Depa men o economics, Facul y o Business and economic s udies, nelson
Mandela uni e si y, Po elizabe h, 6031, sou h a ica
h ps://doi.o g/10.1080/23311975.2024.2343411
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
Recei ed 4 Oc obe 2023
Re ised 1 ap il 2024
accep ed 10 ap il 2024
KEYWORDS
Bi coin; gold; oil; a ican
cu encies; quan ile
connec edness; black
swan e en s
REVIEWING EDITOR
Da id McMillan,
Uni e si y o s i ling,
Uni ed kingdom o g ea
B i ain and no he n
i eland
SUBJECTS
economics; Finance;
economics and
De elopmen
JEL CODE
O43; g2
2 . QaBhOBhO e al.
Unlike de eloped equi y ma ke s, a ica equi y ma ke s we e no a ec ed much by he cOViD-19
pandemic and ongoing Russia-Uk aine con lic due o hei unde de eloped na u e and disco dance
wi h global equi y ma ke s (Boako & alagidede, 2016; iyke & ho, 2021). howe e , a ican cu ency
ma ke s ha e no been spa ed om he ad e se e ec s o he mos ecen black swan e en s, wi h
many a ican economies expe iencing his o ic exchange a e lows agains he Us dolla (elbany &
elhenawy, 2021). Fo ins ance, majo a ican cu encies such as he nige ian nai a (₦), egyp ian Pound
(e£), ha e sha ply dep ecia ed om ₦360/Us$ o ₦915/Us$; and e£15.72 o e£30.91, espec i ely,
be ween Ma ch 2020 and Decembe 2023. some s udies a ibu e he sha p luc ua ions expe ienced
in cu ency ma ke s in eme ging and de eloping coun ies o geopoli ical isks associa ed wi h
Uk aine-Russia wa and mone a y policy esponses o esul ing in la ion p essu es caused by ising
ene gy and commodi y p ices (hui, 2022; aliu e al., 2023; hossain e al., 2024). hese ola ile cu ency
mo emen s a e o pa icula conce n o a ican economies who a e hea ily dependen on commodi y
expo s and o eign di ec in es men , and such cu ency mo emen s a ec hese economies h ough
hei impac on he ex e nal balances, public inances, in la ion, p i a e consump ion, and in es men
(a enga & Mougoue, 2021). Mo eo e , a ican cu encies a e loa ed in in e na ional cu ency ma ke s
despi e ha ing limi ed liquidi y and dep h which ampli ies he isks associa ed wi h cu ency exposu e
(kumah & Odei-Mensah, 2022).
an impo an esea ch ques ion ha ou pape poses, is whe he isks in a ican cu ency ma ke s can
be hedged by al e na i e asse s such as c yp ocu encies and commodi ies. On one hand, he e has been
a su gency o in e es in c yp ocu encies as hedging op ions by in es o s ollowing hei exponen ial
p ice g ow h which su passed ha o o he in es men asse s (Phi i, 2022). nada ajah e al. (2021) high-
ligh s ha Bi coin is inc easing being emb aced by a ican coun ies such as sou h a ica, nige ia and
kenya, who ha e used hese digi al cu encies o hedge agains domes ic liquidi y p oblems and educe
c oss-bo de ansac ion cos s. Fu he mo e, in es o in e es s in digi al cu encies ha e signi ican ly isen
in a ica o e he pas ew yea s, wi h kumah and Odei-Mensah (2022) epo ing a 130% ise in olume
o c yp ocu ency aded in he con inen since 2018. On he o he hand, he inancializa ion o com-
modi ies has a ac ed a en ion om inancial in es o s who iew hem as an al e na i e asse class ha
can be used o di e si ica ion pu poses (golub, 1983; Basak & Pa lo a, 2016). no ably, some a ican
coun ies like sou h a ica and nige ia, who a e p oduce s and expo s o p ima y commodi ies like gold
and oil, ace a de alua ion isk o local cu ency du ing pe iods o uns able commodi y ises (Wen
e al., 2020).
Despi e he inc easing need o iden i y po en ial hedges o a ican coun ies, he ecen li e a u e
examining he di e si ica ion p ope ies o c yp ocu encies and commodi ies owa ds cu encies du ing
he pandemic and Uk aine-Russia wa ha e mainly ocused on non-a ican economies (Ji e al., 2020;
Ding e al., 2021; hsu e al., 2021; adekoya e al., 2022; chen e al., 2022; Maghye eh & abdoh, 2022;
an onakakis e al., 2023; hani e al., 2023; Rehman e al., 2023; hai hung, 2023; Raza e al., 2024). he
only ela ed s udies which ha e ocused on a ican cu encies ha e been conduc ed be o e he cOViD-19
pandemic and mos o hese s udies p esen con lic ing esul s (emenike, 2019; nada ajah e al., 2021;
Ols ad e al., 2020; a enga & Mougoué, 2021; kumah & Odei-Mensah, 2022; Okonkwo e al., 2021; Opoku
e al., 2023). Besides, hese p e ious s udies ha e elied on mean-based es ima o s, such as c oss-co ela ion
analysis and gaRch- ype models, which canno cap u e ail isk connec edness inhe en o Black
swan e en s.
since ex eme mo emen s ha e been mu ually obse ed in a ican cu encies, bi coin, gold and oil
du ing he cOViD-19 pandemic and Uk aine-Russia wa , i is impo an o examine spillo e s and possi-
ble hedging oppo uni ies a he ail-end dis ibu ion o hese inancial asse s. We he e o e use he
quan ile connec edness amewo k o ando e al. (2022) which ex ends he VaR based connec edness
amewo k Diebold and Yilmaz (2012, Diebold & Yılmaz, 2014) using he quan ile au o eg ession (QaR)
app oach o koenke and Xiao (2006). a s and-ou ea u e o he QVaR connec edness amewo k is i s
abili y o cap u e he s a is ic and dynamic connec edness be ween in es men asse s a di e en quan-
iles o dis ibu ion. his di e s om he adi ional connec edness app oach which examines spillo e s
and connec edness be ween inancial asse s exclusi ely on he mean o he condi ional dis ibu ion. he
QVaR allows he esea che o ocus on bo h he median and ail ends o he dis ibu ion and hus
cOgen BUsiness & ManageMen 3
cap u e loca ion asymme ic spillo e s be ween di e en asse s unde a ious ma ke condi ions co e-
sponding o bull, no mal and bea ma ke s. We can he e o e es he hypo hesis ha :
h00: spillo e s and connec edness be ween a ican cu encies, bi coin, gold and oil di e a a ious
ma ke s a es and hus o e asymme ic hedging oppo uni ies.
Fu he no e ha we ocus ou a en ion on he hedging p ope ies o c yp ocu encies and p ima y
commodi ies on 4 a ican cu encies, namely; he alge ian Dina, he nige ian nai a, he sou h a ica
Rand and he egyp ian Pound. no ably hese cu encies a e amongs he mos aded in a ica (h ps://
inance.yahoo.com/news/a ica-mos - aded-cu encies-2020-101659895.h ml) and belong o coun ies
which a e ‘leade s’ in a ica in e ms o geog aphic size (alge ia), popula ion size (nige ia) and echno-
logical ad ancemen (sou h a ica and egyp ). Mo eo e , nige ia and alge ia a e oil-expo ing a ican
coun ies whe eas sou h a ica and egyp a e oil-impo e s. also, alge ian and egyp ian cu encies a e
linked o mone a y policy and banking p ac ices based on he sha iah law whils sou h a ica and
nige ia ha e adi ional mone a y p ac ices and inancial sys ems. las ly, egyp and nige ia (sou h a ica
and alge ia) ha e mu ually expe ienced high (mode a ely low) le els o in la ion and cu ency dep ecia-
ion in he pos cOViD-19 e a. oge he , hese obse a ions allow us o u he es he hypo heses ha :
h01: cu ency hedging oppo uni ies o bi coin, gold and oil di e be ween he cu encies o oil-p oduce s and
oil-impo e s in a ican coun ies a di e en s a es o he ma ke s.
h02: cu ency hedging oppo uni ies o bi coin, gold and oil di e be ween he cu encies o sha iah-linked
banking s uc u e and non-sha iah banking s uc u e a di e en s a es o he ma ke .
h03: cu ency hedging oppo uni ies o bi coin, gold and oil di e be ween he cu encies in high-in la ion and
low-in la ion en i onmen s a di e en s a es o he ma ke .
all-in-all, ou s udy p o ides insigh in o whe he bi coin, gold and/o oil, can be used by in es o s o
di e si y o hedge agains a ican cu ency isk in di e en s a es o he ma ke du ing he cOViD-19 and
Russia-Uk aine con lic s. o he bes o ou knowledge, no p e ious s udy has examined he ail-end
spillo e e ec s be ween a ican cu encies and o he commodi y/c yp ocu ency ma ke s du ing he
mos ecen Black swan e en s, highligh ing he o iginali y and con ibu ion o ou s udy. We also con-
side ou s udy ele an o ma ke egula o s, in es o s and esea che s o se e al easons. Fi s , in con-
ex o a ican ma ke egula o s, he adop ion o c yp ocu encies as in es men asse s is hea ily deba ed
wi h se e al a ican coun ies (including alge ia) placing on bans on c yp ocu encies and o he a ican
na ions a e deba ing on whe he o ollow in pu sui . Ou indings a e ele an o hese a gumen s as
hey can highligh he p os and cons o adop ing Bi coin in ligh o i s di e si ica ion bene i s o ola ile
a ican cu encies. secondly, gi en he ecen launch o a cF a, he sea ch o hedges agains a ica
cu ency luc ua ions becomes c i ical, as egional in eg a ion e o s seek o boas in a-con inen al ade,
o eign di ec in es men and c oss-bo de business expansions. hi dly, ou indings can shed ligh on
whe he he e a e any obse ed di e si ica ion bene i s om using sha iah-law backed cu encies com-
pa ed o cu encies o coun ies ounded on mains eam inancial sys ems. hese indings a e impo an
as hey can in o m on whe he he ype o banking and inancial sys em unde ling a ican cu encies
in luences he hedging oppo uni ies g an ed by c yp ocu encies and commodi ies. his would also be
o in e es o esea che s as i can add alue o he ongoing deba e on whe he sha iah complian asse s
a e decoupled om global ma ke s du ing c isis pe iods (shahzad & nai a , 2022; abelsi e al., 2024).
las ly, ou esul s can shed led ligh on whe he in la iona y en i onmen s in luence he di e si ica ion
bene i s o commodi ies and c yp ocu encies owa ds cu ency isk. his would be o in e es o in es-
o s and policymake s as mos a ican coun ies ha e expe ienced double-digi in la ion a es since he
Uk aine-Russia wa and hence iden i ying hedging ins umen s owa ds cu ency isk becomes impo an .
he emainde o his pape is o ganized as ollows. he nex sec ion p esen s he li e a u e e iew.
he hi d sec ion p esen s he empi ical amewo k o he s udy. he ou h sec ion p esen da a and
esul s. he i h sec ion concludes he s udy in he o m o policy implica ions and ecommenda ions.
2. Li e a u e e iew
heo e ically, cu ency spillo e s a ise om a clus e ing o in o ma ion om news which c ea es a shock
in excess o ha caused by ma ke undamen als and subsequen ly hese shocks spillo e in o o he
4 . QaBhOBhO e al.
inancial ma ke s h ough ‘me eo -showe ’ e ec s (engle e al., 1990). he excess ola ili y spillo e
be ween cu ency and inancial ma ke s can be a ibu ed o linkages be ween eal economies h ough
in e na ional news, coope a i e o compe i i e mone a y policy coo dina ion, and po olio balance
e ec s (i o e al., 1992). since he inancializa ion o commodi ies as ading ins umen s (hamil on,
1996), o he heo e ical explana ions o commodi y- o-cu ency spillo e s ha e eme ged and include: (1)
he s icky-p ice model, which holds ha highe commodi y p ices lead o in la iona y p essu es on eal
wages, he p ice o non aded goods, and he exchange a e o a commodi y-expo ing coun y; and (2)
he e ms-o - ade model, unde which e ms-o - ade shocks lead o a shi in he ela i e demand o
an expo e ’s cu ency and he e o e in i s exchange a e (sokhan a & Bou i, 2023). no ably, du ing
‘ex eme’ and ‘unan icipa ed’ e en s, such as he cOViD-19 and he Russian-Uk aine wa , inancial asse s
end o e ol e as a - ail p ocess whose e ec s a e con agious and can spillo e o o he inancial ma -
ke s esul ing in he co-mo emen o asse p ices a hei ail-dis ibu ion ( aleb, 2007). Because a - ail
beha io is non-gaussian, adi ional inance models and mean-based econome ic es ima ion echniques
a e ine icien in cap u ing he dynamics o e en s occu ing a he ex eme ends o he p obabili y
dis ibu ion ( aleb, 2005).
Mos p e ious s udies ha ha e examined spillo e s be ween a ican cu encies and o he inancial
ma ke s ha e elied on mean-based es ima o s o empi ical pu poses and igno ed possible ail connec -
edness. Fo ins ance, emenike (2019) used he mul i a ia e gaRch-Bekk model o examine ola ili y spill-
o e s amongs h ee Wes a ican cu encies (i.e. Wes a ican F anc, gambian Dasi and nige ian nai a)
and ind spillo e e ec s amongs he di e en cu ency combina ions excep o he nai a and Dalasi
whe e no spillo e e ec s a e obse ed. Ols ad e al. (2020) use he diagonal-Bekk model o examine he
ola ili y spillo e s and op imal po olio weigh s be ween oil ma ke s and cu encies o op oil-expo ing
and oil-impo ing coun ies (inclusi e o i e a ican coun ies) and ind ha cu ency hedging using oil
is mo e e ec i e o oil-expo ing coun ies. a enga and Mougoué, (2021) in es iga e he cu ency spill-
o e be ween 16 a ican coun ies, i e eme ging ma ke s, and six ad anced ma ke s using he Diebold
and Yılmaz (2014) VaR-based connec edness app oach and ind ha mos a ican cu encies a e ne
ecei e s o e u ns and ola ili y shocks. Okonkwo e al. (2021) p esen ed a wa ele cohe ence o Bi coin
and i e a ican cu encies in ime- equency space and e ealed signi ican hedging p ope ies o Bi coin
o all cu encies in he p esence o noise.
o he bes o ou knowledge, only wo s udies ha e examined he ail-ended connec edness be ween
a ican cu encies and o he inancial ma ke s. Fi s , nada ajah e al. (2021) examine he ex eme con-
nec edness be ween bi coin and eigh a ican cu encies using ex eme co ela ion analysis and a bi a -
ia e ex eme alue model and documen e idence in a o o nega i e co-exceedances o di e si ica ion
bene i s o bi coin and ind li le hedging e ec (o lack o ex eme co-mo emen s). second, kumah and
Odei-Mensah (2022) examine he spillo e s be ween al coins and six a ican ia cu encies using quan ile
eg essions and a quan ile-on-quan ile app oach and ind ha c yp ocu encies (pa icula ly e he eum)
a e sui able di e si ie s and hedges o a ican cu encies in he middle and uppe quan iles, bu no a
lowe quan iles. ne e heless, hese wo s udies use echniques ha analyze a single poin on he
ail-end dis ibu ion and assume ha he ankings o ne ansmi e s and ecei e s only a y ac oss
quan iles bu emain s a ic o e ime (cappiello e al., 2014). he e o e, hese s udies canno accoun o
con agion build-up e ec s, in which connec edness sha ply inc eases o e ime and is signi ican ly dis-
inc om ‘no mal connec edness’ (Fo bes & Rigobon, 2002; Bau , 2003; Rigobón, 2019). Mo eo e , p e i-
ous a ican ela ed s udies ha e no examined he spillo e s be ween exchange a es and commodi ies/
c yp ocu encies du ing he mos ecen Black swan e en s.
Ou s udy hus becomes he i s in he li e a u e o examine connec edness be ween a ican
cu encies-bi coin-gold-oil du ing he cOViD-19 pandemic and he Russia-Uk aine wa and builds upon
he hos o li e a u e which ha e examined he hedging p ope ies o c yp ocu encies and commodi ies
owa ds in e na ional cu encies using da a co e ing he mos ecen Black swan episodes. no ably,
hese s udies use mo e ad anced econome ic echniques cap u ing di e en o ms o asymme ies com-
pa ed o hose o p e ious a ican li e a u e such as he Bekk-Dcc-gaRch model (hsu e al., 2021; chen
e al., 2022); c oss-quan ilog am me hod (Ji e al., 2020); wa ele cohe ence me hods (Maghye eh &
abdoh, 2022), condi ional Value-a -Risk (coVa R) copulas (hani e al., 2023; Rehman e al., 2023); he
equency connec edness app oach o Ba uník and křehlík (2018) (Ding e al., 2021); he VP
cOgen BUsiness & ManageMen 5
connec edness app oach o an onakakis e al. (2020) (adekoya e al., 2022; an onakakis e al., 2023; hai
hung, 2023; Raza e al., 2024) and VaRX-based connec edness model (Bige na, 2024).
no ably mos p e ious s udies come o di e en conclusions on he hedging bene i s o commodi ies
and c yp ocu encies agains exchange a es du ing he Black swan pe iods. Fo ins ance, Ji e al. (2020;
adekoya e al. (2022); Maghye eh and abdoh (2022) all ind ha gold is sa e ha en du ing he cOViD-19
pandemic o mos in e na ional cu encies, o he s such as Ding e al. (2021), hani e al. (2023) and Raza
e al. (2024) ind o he wise. Mo eo e , hsu e al. (2021) ind c yp ocu encies a e no di e si ie s o
exchange a es whils Rehman e al. (2023) ind ha Bi coin is an app op ia e hedge o chinese and
Russian cu encies. Fo he case o p ima y commodi ies, hai hung (2023) inds oil o be a sui able
hedge o cu encies, adekoya e al. (2022) inds hedging p ope ies o oil o only exis a e he
Uk aine-Russia wa whils chen e al. (2022) and an onakakis e al. (2023) and Bige na (2024) mo e
ecen ly ind ha oil canno di e si y cu ency isk.
Ou s udy con ibu es o he li e a u e by examining he ail connec edness be ween a ican cu en-
cies, bi coin, gold, and oil using he quan ile connec edness app oach o ando e al. (2022). he ame-
wo k modi ies he ne wo k connec edness amewo k o Diebold and Yılmaz (2014) by es ima ing he
VaR model using he quan ile au o eg essions o koenke and Xiao (2006) and e alua ing dynamic con-
nec edness ia o ecas e o a iance decomposi ions (FeVD) ob ained a di e en quan iles o dis ibu-
ion. se e al ecen s udies ha e applied he QVaR-based connec edness model o examine e u ns
spillo e dynamics wi hin single ma ke s such as cu ency ma ke s (Bou i e al., 2020), equi y ma ke s
(shahzad e al., 2021), bond ma ke s (naeem e al., 2022a), c yp ocu ency ma ke s (Bou i e al., 2021;
naeem e al., 2022b), ene gy ma ke s (chen e al., 2022; Jena e al., 2022; su e al., 2022) as well as
ac oss se e al ma ke s such as he oil-s ock ma ke s (liu e al., 2021; Mensi e al., 2021); p ecious
me als-oil-ene gy ma ke s (Mensi e al., 2021), oil-s ock ma ke s; ag icul u e-ene gy ma ke s ( iwa i e al.,
2022), equi ies-bond-commodi ies-c yp ocu ency ma ke s (Xia e al., 2022), commodi ies,
c yp ocu ency-ene gy-s ock ma ke s (Yousa e al., 2022). hese p e ious s udies ocus on he 95 h, 50 h
and 5 h quan iles as a measu e o connec edness du ing bulls, no mal, and bea ma ke s, espec i ely.
he consensus om hese s udies is ha connec edness is concen a ed a he end ails o dis ibu ion
and he ankings o ne ansmi e s and ecei e s o ail-end shocks wi hin he sys em a y ac oss ime
as well as ac oss di e en ma ke s. howe e , wi h he excep ion o su e al. (2022) and Xia e al. (2022),
no p e ious s udies ha e examined ail-connec edness in inancial and commodi y ma ke s du ing he
Uk aine-Russia wa as he mos ecen ‘ex eme e en ’. Mo eo e , wi h he excep ion o Billah e al. (2022)
and iwa i e al. (2022), p e ious s udies s ic ly ocus on ail connec edness among e u ns se ies and
igno e ola ili y spillo e s, which a e mo e accu a e measu es o in es o sen imen and c isis build-up
(Diebold & Yılmaz, 2014). Ou s udy conside s hese gaps li e a u e and p esen s a case s udy o a ican
cu encies-bi coin-gold-oil using bo h e u ns and ola ili y se ies, ocusing on pe iods co e ing he
ongoing cOViD-19 pandemic and he Russia-Uk aine wa .
3. Da a and me hodology
3.1. Da a sou ces and o ma ion
We use daily ime se ies da a consis ing o he Us dolla exchange a es o ou majo a ican cu encies
(alge ia, egyp , nige ia, and sou h a ica), as well as Bi coin, gold, and c ude oil. he da a spans om 4
no embe 2019, o 7 sep embe 2022, co e ing signi ican e en s such as he cOViD-19 pandemic and
he ongoing Russian-Uk aine con lic , bo h conside ed ecen black swan e en s. all da a used in his
s udy we e sou ced om in es ing.com and ans o med in o na u al loga i hms o calcula e he loga-
i hmic di e ences in asse p ices (P) be ween ime -1 and , de ined as
ln
P
P
=
×
−1
100
(1)
Fu he mo e, we applied a gaRch (1,1) model o es ima e he condi ional ola ili y o each a iable.
he e u n p ocess o each a iable is assumed o ollow an au o eg essi e p ocess as shown below:
6 . QaBhOBhO e al.
I Nh
=++ ∼
()
−−
µ ρ εε
01 1
0
|,
(2)
Whe e, ε ep esen s a ec o o whi e noise, condi ional on he in o ma ion a ailable a ime -1,
deno ed as ε |I -1 and assumed o ha e a no mal dis ibu ion wi h a mean o ze o. he condi ional a i-
ance, h , ollows a uni a ia e gaRch (1,1) p ocess as desc ibed by:
hh
i i i i
=++
−−
ω β αε
1
2
1
2
, (3)
he pa ame e s α and β a e non-nega i e, ep esen ing he aRch and gaRch e ms, espec i ely.
subsequen ly, he condi ional ola ili y, h , is u ilized as a p oxy o he ola ili y se ies in ou analysis.
3.2. Summa y s a is ics
he p elimina y analysis i s explo es he desc ip i e s a is ical p ope ies o he inancial asse s consid-
e ed in his s udy. able 1 epo s bo h he desc ip i e s a is ics and uni oo es o e u n (Panel a)
and ola ili y (Panel B) esul s. Panel a shows ha he a e age daily e u ns o a ican cu encies a e
posi i e du ing his pe iod. his inding sugges s ha a ican cu encies dep ecia ed agains he Us dol-
la . among hese cu encies, nige ia (0.084%) and sou h a ica (0.076%) expe ience he highes a e age
daily dep ecia ion. simul aneously, he e u ns o Bi coin, gold, and c ude oil g ew by an a e age o
0.067, 0.039, and 0.198%, espec i ely. he le el o ola ili y, as measu ed by he s anda d de ia ion,
shows ha Bi coin, gold, and c ude oil a e mo e ola ile han a ican cu encies. among a ican cu en-
cies, he highes ola ili y is ound in sou h a ica (0.988%) and nige ia (0.698%).
skewness and ku osis coe icien s indica e ha he dis ibu ion o asse e u ns is a om no mal. i
is also obse ed ha Bi coin, gold and c ude oil e u ns exhibi nega i e skewness while a ican cu ency
e u ns a e posi i ely skewed as well as lep oku ic dis ibu ion. Fu he mo e, he augmen ed Dickey-Fulle
(aDF) and Phillips-Pe on (PP) es s show ha he asse e u n se ies a e s a iona y, implying ha he null
hypo hesis o he uni oo is ejec ed o all he se ies. We also epo ed he aRch and ljung-Box es s,
which show he p esence o he e oscedas ici y and au oco ela ion, espec i ely. he e oscedas ici y and
au oco ela ion jus i ied he use o he gaRch model o e alua e he ola ili y o asse e u ns.
Panel B shows an analysis o he ola ili y p ope ies o each asse . simila o he esul s in panel a,
i is obse ed ha , on a e age, Bi coin (16.631) and c ude oil (12.876) a e mo e ola ile han a ican
cu encies. among a ican cu encies, he highes daily ola ili y is eco ded in sou h a ica (0.877), ol-
lowed by nige ia (0.496), while he lowes ola ili y is ound in alge ia (0.055). again, he uni oo es
shows ha all he ola ili y se ies a e s a iona y. in addi ion, he aRch and ljung-Box es s show ha
Table 1. summa y s a is ics.
Panel a: e u ns Bi coin gold oil alge ia egyp nige ia sou h a ica
Mean 0.067 0.039 0.198 0.032 0.021 0.084 0.076
s d. De . 3.992 1.034 3.739 0.240 0.496 0.698 0.988
skewness −1.802 −0.332 −0.361 0.534 25.804 15.488 0.556
Ku osis 26.450 6.454 17.203 7.001 770.553 298.034 3.858
aDF −35.3667 −24.329 −22.833 −16.443 −28.351 −15.844 −16.821
PP −35.218 −24.329 −22.574 −25.346 −28.245 −24.874 −24.117
aRCH(10) 7.798 104.39 228.77 162.77 0.014 11.273 163.24
LB-Q(10) 19.932 23.358 17.969 49.624 2.195 37.185 34.187
LB-Q2(10) 7.797 176.59 616.30 239.13 0.014 11.599 251.44
Panel B: ola ili y
Mean 16.631 0.993 12.876 0.055 0.241 0.496 0.877
s d. De . 11.564 0.657 25.279 0.062 0.010 2.763 0.531
skewness 7.882 3.281 4.380 6.251 −17.926 26.642 3.844
Ku osis 83.069 17.657 23.730 53.972 372.664 772.519 23.233
aDF −7.549 −4.883 −5.158 −16.402 −19.009 −24.503 −13.515
PP −7.486 −6.634 −4.521 −16.378 −19.009 −24.284 −13.228
aRCH(10) 2.598 13.256 4.464 5.339 0.043 0.021 8.663
LB-Q(10) 15.814 16.894 9.000 33.681 3.834 3.301 26.874
LB-Q2(10) 2.649 13.879 4.546 5.591 0.044 0.021 8.513
No e: aDF and PP ep esen he augmen ed Dickey-Fulle and Phillips-Pe on uni oo es s, espec i ely. he c i ical alues o he aDF and
PP es s a is ics a 1, 5, and 10% a e −3.436, −2.864, and −1.568, espec i ely. aRCH ep esen s he au o eg essi e condi ional he e oscedas-
ici y es , while LB-Q is he Ljung-Box es s a is ic a he 10 h lag.
cOgen BUsiness & ManageMen 7
he ola ili y se ies does no exhibi he e oscedas ici y and au oco ela ion, which con i ms he obus -
ness o gaRch model in cap u ing he ola ili y beha iou o he se ies.
o u he explo e he beha iou o he e u n and ola ili y se ies o e he sample pe iod, Figu e 1
plo s hei e olu ion. One key piece o e idence om his igu e is ha bo h he e u n and ola ili y
se ies exhibi clus e ing beha iou . his beha iou is pa icula ly isible gi en he numbe o spikes a
he beginning o he cOViD-19 as well as he Russian-Uk aine wa . his inding is consis en wi h he
esul s o he aRch and ljung-Box es s, and also suppo s he need o conside ex eme e en s, which
is he goal o his s udy. in addi ion, i con i ms he i o he es ima ed gaRch model o he da a se ies.
Following his inding, we ou line he quan ile connec edness app oach o s udy he spillo e and con-
nec edness e ec s be ween Bi coin, gold, c ude oil, and a ican cu encies.
3.3. Me hodology
We use he QVaR model o es ima e bo h he connec edness in e u ns and ola ili y, as well as hei
di ec ional spillage. o compu e connec edness ma ices, we exp ess he QVaR(p) as an in ini e-o de
Vec o Mo ing a e age (Ma) ep esen a ion, de ined as ollows:
y yu u
j
p
j j i
i
=
()
+
()
+
()
=
()
+
()
=−=−
∑∑
µτ τ τ µτ τ
∞
1 0
1
ΘΨ
(4)
Figu e 1. e olu ion o e u n and ola ili y o each asse . (a) Re u n beha iou . (b) Vola ili y beha iou .
14 . QaBhOBhO e al.
end o he ail. his has impo an implica ions o ma ke egula o s, as i sugges s ha he ma ke
he ding beha iou expe ienced du ing pe iods o inancial panic can be mo e e ec i ely measu ed by
acking he co-mo emen o he le and igh ails o sys emic ma ke connec edness.
4.3. Dynamic ne spillo e e ec s o indi idual ma ke s
We now p esen he ime- a ying o al ne spillo e e ec s o each indi idual ma ke o he e u ns and
ola ili y se ies in Figu es 7 and 8 o he 5 h (blue con ou ), 50 h (black con ou ), and 95 h ( ed con-
ou s) quan iles, espec i ely. Judging by colo con ou s, ma ke s can be ei he ne ecei e s o ansmi -
e s, depending on he phase o he ma ke cycle. Fo ins ance, we obse e ha mos ma ke s a e ne
ansmi e s ( ecei e s) o e u n shocks du ing bea ma ke s (no mal pe iods), ha is, Bi coin, gold, oil,
he alge ian Dina , and he sou h a ican Rand, while he opposi e occu s o he egyp ian Pound and
nige ian nai a, which a e ne ansmi e s ( ecei e s) o e u n shocks du ing no mal ma ke s (bea pe i-
ods). in o he wo ds, Bi coin, gold, and oil a e signi ican hedges agains mos a ican cu encies du ing
bea ma ke s (and no du ing anquil pe iods), and he e o e o e ail- isk hedging oppo uni ies on
cu ency e u ns du ing sha p ma ke slumps.
con e sely, o he ola ili y se ies, ne spillo e e ec s dominan ly exis a he igh ails, al hough he
dynamics o a ious ma ke s di e o e ime and e en s. Fo ins ance, du ing he s ock and oil ma ke
Figu e 4. o al connec edness e u ns.
Figu e 5. o al connec edness ola ili y.
cOgen BUsiness & ManageMen 15
c ash pe iod o ea ly Ma ch – ap il 2020, mos ma ke s we e ne ecei e s o ail-end ola ili y shocks,
excep o gold, oil, and he egyp ian Pound and sou h a ican Rand. howe e , du ing he accina ion
induc ion pe iod o Decembe 2020 – Ma ch 2021, he nai a is he dominan ansmi e o ola ili y
shocks wi h o he ma ke s being ne ecei e s, whe eas du ing he Us elec ion pe iod o no embe 2021
– Janua y 2022, gold, he Dina , he nai a, and o a lesse ex en Bi coin a e ne ansmi e s, while he
emaining ma ke s a e ne ecei e s. las ly, we obse e swi ching dynamics in ne spillo e e ec s a e
he s a o he Uk aine-Russia wa , in which Bi coin, egyp , alge ia, and sou h a ica (nige ia) swi ch
om ne ecei e s ( ansmi e s) o ne ansmi e s ( ecei e s) o ola ili y shocks. al oge he , hese ind-
ings highligh he ac ha he ne ola ili y spillo e e ec s o indi idual ma ke s do no only a y
ac oss ma ke s a es bu also ac oss ime/e en s, while c yp ocu encies and commodi ies could ha e
Figu e 6. (a) R D_ e u ns. (b) R D_ ola ili y.
Table 4. Co ela ion coe icien s be ween Ci a di e en quan iles and sub-pe iods.
Full sample (28/5/2020 – 07/09/2022) s ock and oil ma ke slump 28/03/2020 – 01/05/2020
Le Median Righ Le Median Righ
Le 10.38 0.18 10.49 0.30
Median 0.30 1 0.17 0.01 1 0.73
Righ 0.56 0.20 1 0.16 0.001 1
Vaccina ion induc ion 01/20/2020 – 01/03/2021 oil ma ke boom 01/07/2021 – 01/09/2021
Le 10.009 −0.05 1−0.36 0.41
Median 0.56 1 −0.63 −0.15 1 −0.59
Righ −0.05 −0.24 1 0.11 −0.20 1
us p esiden ial elec ions 01/11/2021 – 31/01/2022 Russia-uk aine wa 24/02/2022 – 01/07/2022
Le 10.68 0.32 10.68 0.81
Median −0.57 1 0.46 −0.02 1 0.26
Righ −0.05 0.04 1 0.63 −0.31 1
No e: he co ela ion coe icien s o he ( e u n) ola ili y se ies a e epo ed in he lowe (uppe ) iangle o he co ela ion ma ix in he
no mal (bold) ex .
16 . QaBhOBhO e al.
Figu e 7. ne e u ns connec edness.
Figu e 8. ne ola ili y connec edness.
cOgen BUsiness & ManageMen 17
p o ided su icien hedging bene i s agains ail- isk cu ency ola ili y be o e he Uk aine-Russia wa .
such hedging bene i s a e only obse able o Bi coin a e he s a o he wa .
Finally, we p esen ime- a ying pai wise ne spillo e e ec s ma ke s o e alua e he possible hedg-
ing p ope ies o c yp ocu ency and commodi ies agains cu ency isk a he mic ole el. While he pai -
wise spillo e be ween mos ma ke s o bo h e u n and ola ili y se ies is p ominen h oughou he
en i e sample pe iod a di e en quan iles, we obse e excep ionally li le ne e u n spillo e e ec s
be ween he nai a and (i) Bi coin, (ii) Oil (iii) Dina (i ) sou h a ican Rand (Figu e 9), on he one hand,
and li le ne ola ili y spillo e e ec s be ween he nai a and (i) gold (ii) Dina as well as be ween he
egyp ian Pound and (i) Bi coin (ii) gold (iii) Oil Dina he nai a (Figu e 10).
no e ha ou ime- a ying spillo e s do no di e much om hose ob ained by he s a ic connec -
edness analysis as hey bo h imply ha he e a e exploi able ail- isk hedging bene i s o c yp ocu ency
and commodi ies agains he nai a and he egyp ian pounds du ing ex eme e en s. Fo he sou h
a ican Rand and he Dina , he e a e only ail-hedge bene i s agains he nai a and he egyp ian Pound,
bu no agains Bi coin, gold, and oil. collec i ely, hese esul s imply ha du ing he ecen Black swan
episodes (i) sa iah-based cu encies (egyp ian pound and alge ian li a) do no o e any hedging ad an-
ages o e cu encies linked o adi ional ‘ inancial sys ems’ (nige ia and sou h a ica) (ii) cu encies o
oil-p oducing coun ies do no o e be e hedges agains inancial asse s compa ed o hose o
non-oil-p oducing coun ies and ice e sa (iii) cu encies linked o high-in la ion (low-in la ion) coun ies
can (canno ) de i e di e si ica ion bene i s om hedging in commodi ies and c yp ocu encies.
5. Conclusions
Following he cOViD-19 ou b eak, a ican cu encies, bi coin, gold and oil ma ke s ha e exhibi ed ail-end
beha io e lec ed in pe iodic ‘bull and bea ’ cycles which a e dis inguishable om anquil ma ke
dynamics. Whils ail-end beha io in indi idual ma ke s is e iden , i is ye o be de e mined whe he
he e exis sys emic ail-end co-mo emen s be ween a ican cu encies and c yp ocu encies/
Figu e 9. Coun y-speci ic connec edness ( e u ns).
18 . QaBhOBhO e al.
commodi ies ma ke s in a ne wo k s uc u e. o his end, ou s udy uses a QVaR based app oach o
modelling ail-end spillo e s and connec edness e ec s amongs a ican cu encies and c yp ocu encies/
commodi ies ma ke s wi h he pu pose o iden i ying sys em-wide and pai wise spillo e s amongs hese
ma ke s ac oss a se ies o ‘ex eme e en s’ expe ienced be ween 4 no embe 2019 and 7 sep embe 2022.
Ou s udy iden i ies h ee ‘boom-bus ’ pe iods in which ail-connec edness is mo e p onounced
amongs he ma ke s. Fi s , he s ock and oil ma ke c ashes in ap il 2020 we e a ibu ed o he ab up
shu down o he wo ld economy in esponse o he ou b eak o he disease, which was ollowed by a
sha p boom in ma ke s ollowing he app o al o he cOViD-19 accina ion in Decembe 2020, s e ching
o Ma ch 2020. second, he ‘g ea ma ke boom’ expe ienced du ing he p esiden ial ace and elec ions
be ween no embe 2020 and Janua y 2021, wi h ma ke s expe iencing a bus ollowing he Janua y 6 h
capi ol hill a acks. las ly, a he s a o he ongoing Russia-Uk aine wa , when many commodi ies expe-
ienced boom ma ke s, a ican cu encies sha ply de e io a ed agains he Us dolla . a each o hese
ex eme co-mo emen s, le - ail and igh - ail connec edness a e ound o be nega i ely co ela ed, hus
e lec ing he momen um he ding ype o beha io by ma ke pa icipan s owa ds in o ma ion emula -
ing om one ail end while igno ing in o ma ion associa ed wi h he opposi e ail e en .
he s udy u he dis inguished he ne ansmi e s om he ne ecei e s o sys emic ail-end shocks
o e alua e whe he he e exis any hedging bene i s o c yp ocu ency and commodi y asse s agains
a ican cu ency ail isk along he se ies o ex eme e en s. F om a sys em-wide pe spec i e, we ind he
egyp ian Pound and he nai a (c yp ocu encies and commodi ies) o be ne ansmi e s ( ecei e s) o
e u ns shocks du ing bo h bull and bea ma ke s. howe e , he indings o he pai wise ne spillo e
e ec s u he show weak connec edness o s ong hedging capabili ies a all quan iles o dis ibu ion
o he egyp ian Pound and nige ian nai a agains Bi coin, gold, and oil (gold) o episodes p io (sub-
sequen ) o he Russian-Uk aine con lic . Mo eo e , we obse e he ail-end hedging bene i s o he
egyp ian Pound and nige ian nai a agains he Rand and Dina , bu no o he la e cu encies agains
c yp ocu ency and commodi ies.
Figu e 10. Coun y-speci ic connec edness ( ola ili y).
cOgen BUsiness & ManageMen 19
Fou main economic ins i u ions eme ge om ou indings. Fi s ly, ail-end connec edness has been
p ominen in he pos cOViD-19 e a and u he magni ied du ing he Uk aine-Russia wa . secondly,
cu encies based on sha iah-complian inancial and banking sys ems do no o e mo e hedging bene-
i s om Bi coin, oil and gold compa ed o cu encies based on adi ional inancial and banking sys ems.
hi dly, cu encies in ei he oil-expo ing o oil-impo ing coun ies do no in luence he di e si ica ion
bene i s gained om commodi ies and c yp ocu encies. las ly, hedging p ope ies o commodi ies and
c yp ocu encies a e mo e p ominen in coun ies wi h high-in la ion en i onmen s and a e absen in
coun ies wi h low-in la ion a es.
O e all, ou indings a e ele an o ma ke pa icipan s and policymake s, who ha e become inc eas-
ingly in e es ed in explo ing ail- isk hedge s a egies o capi alize on sha p downside ma ke swings and
inc ease in es men payo s du ing ex eme ma ke mo emen s. Ou esul s show ha ade s o cu en-
cies in high-in la ion en i onmen s such as nai a and he egyp ian Pound can bene i om ail- isk hedg-
ing oppo uni ies in Bi coin, gold and oil,. hese indings a e also impo an o policymake s since
se e al membe s a es linked o he a cF a a e cu en ly expe iencing high, double-digi in la ion a es
and hence he di e si ica ion bene i s om c yp ocu encies and commodi ies can pay a ole in educing
cu ency isk in c oss-bo de ading and in es men ac i i ies.
he main sho coming o ou s udy is he small numbe o ma ke s included in he ne wo k anal-
ysis. he e o e, a na u al a enue o u u e esea ch would be o apply high-dimensional ne wo k
models, such as he ecen ly in oduced quan ile ne wo k au o eg essi e (QnaR) model, o examine
ail- isk spillo e s o a la ge sample o a ican cu encies. also conside ing ha low-in la ion coun-
ies canno de i e any hedging bene i s om commodi ies and c yp ocu encies, hen u u e
esea ch can be conduc ed agains a wide ange o possible hedging ins umen s such as g een
asse s and high- ech s ocks.
Acknowledgmen
no unding was ecei ed o he esea ch.
Au ho con ibu ions
Thobekile Qabhobho: concep ualiza ion; alida ion; w i ing-o iginal d a ;. Cwayi a Mpuku: Da a cu a ion; in es i-
ga ion. Izunna Anyikwa: Fo mal analysis, in es iga ion, me hodology, alida ion, w i ing-o iginal d a . And ew Phi i:
conec ualiza ion, Fo mal analysis, w i ing- e iew, and edi ing; in es iga ion, Me hodology, P ojec adminis a ion,
supe ision, W i ing-o iginal d a .
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Abou he au ho s
Thobekile Qabhobho is a senio lec u e wi h he Depa men o economics a he nelson Mandela Uni e si y,
sou h a ica who has esea ch in e es s in applied econome ics, Mone a y economics, in e na ional Finance and
Mac oeconomics.
Cwayi a Mpuku is a lec u e wi h he Depa men o economics a he nelson Mandela Uni e si y, sou h a ica who
has esea ch in e es s in Mone a y economics, Financial economics and Mac oeconomics.
Izunna Anyikwa is a esea ch ellow wi h he Depa men o economics a he nelson Mandela Uni e si y,
sou h a ica and is an expe wi h yea s o esea ch expe ience in he ield o inancial ma ke , in es men , in e na-
ional ade, de elopmen economics, applied econome ics and mac oeconomics.
And ew Phi i, who is he co esponding au ho o his manusc ip , is an associa e p o esso wi h he Depa men
o economics a he nelson Mandela Uni e si y, sou h a ica who enjoys a wide ange o publica ions in in e -
na ional jou nals wi h esea ch in e es s mainly in mac oeconomics, applied econome ics and inancial
economics.
20 . QaBhOBhO e al.
ORCID
and ew Phi i h p://o cid.o g/0000-0003-1775-3546
Da a a ailabili y s a emen
he da a is a ailable om he au ho s upon easonable eques .
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