Connectedness in cross-assets and digital assets attention indices

Abstract

We explore both the static and dynamic connectedness across traditional and unconventional assets classes using the Baruník-Křehlík connectedness and wavelets techniques. These techniques are used to characterise the static and rolling-window connectedness of 12 conventional assets and Non-Fungible Tokens (NFT), Index On Cryptocurrency Environmental Attention (ICEA) and Central Bank Digital Currency (CBDC) attention indices. Between January 25, 2010 and July 11, 2022, the wavelet multiple correlations showed increasing high levels of correlation through short-to long-terms; with DJI and SP500 dominanting with the tendency to lead or lag in the short-term. The Baruník-Křehlík technique also showed that spillover is higher at short-terms and gradually decreases across the periods. We also report a pair-specific, frequency-dependent connectedness across the assets and indices. Primarily, we show that Non-Fungible Tokens Attention Index (NFTAI) has a higher frequency-based time-varying spillover across assets than CDBC and ICEA. Regulators need to pay close attention to NFTs because they are not fungible and interchangeable neither can their ownership be transferred.

Keywords

• NFTAI
• ICEA
• CBDCAI
• Spillover
• Frequency-domain