Oben, R. J., Zhakanova Isiksal, A., Assi, A. F., & Faisal, F. (2025). Volatility and return connectedness across decentralized finance assets, precious and industrial metals, green energy and technology markets Mineral Economics, 1-22.
In a newly published article in Mineral Economics, Near East University (NEU) researchers from the Faculty of Economics and Administrative Sciences: Remy Jonkam Oben, Prof. Dr. Aliya Zhakanova Isiksal, and Assist. Prof. Dr. Ala Fathi Assi examine how today’s fast-growing digital finance instruments interact with more traditional and sustainability-focused markets, which is an important question for anyone interested in risk, and portfolio diversification in global markets.
Titled “Volatility and return connectedness across decentralized finance assets, precious and industrial metals, green energy and technology markets,” the study compares four groups of instruments: decentralized finance (DeFi) tokens (SNX, LINK, BAT, MKR), precious metals (gold, silver, platinum, palladium), industrial metals (copper, aluminium, zinc, nickel), and S&P green market indices (clean energy and cleantechnology). By using the widely applied Diebold–Yilmaz (2012) connectedness framework, the authors track how shocks in one market can spillover into others, both in returns and volatility.
The results point to a clear pattern that S&P green markets are highly interconnected and tend to act as strong transmitters of return and volatility to other instruments. In contrast, DeFi tokens show extremely low connectedness with metals and green markets, meaning they often move relatively independently, which can be attractive from a diversification standpoint. Across all 16 instruments together, the study reports substantial total return connectedness (58.1%) and moderate total volatility connectedness (45.2%), indicating that spillovers are a meaningful part of market behaviour.
Another notable finding is the impact of major global stress periods. The study observes that the COVID-19 period intensified transmissions, especially in early 2020, reinforcing the idea that cross-market links can strengthen when uncertainty rises. Overall, the authors highlight a practical significance by understanding which assets are tightly linked and which are less interconnected. Thus, investors may be able to build more resilient portfolios, based on the strategic combination of instruments that have low volatility connectedness with each other, and the shock transmitting characteristics of the assets, present less influence by risks, and their more resilient characteristics to the external shocks.
Abstract
The revolutionary emergence of decentralised finance (DeFi) and sustainable investments have significantly reshaped the global financial landscape. This has created unprecedented interconnections between conventional and emerging asset classes. This study analyses the return and volatility connectedness among blockchain-based DeFi assets, traditional commodities (precious and industrial metals), and sustainable investments (S&P green markets) from March 15, 2018, to April 29, 2024, by employing the VAR-based Diebold and Yilmaz (2012) model. Results show that the DeFi tokens (S&P green markets) are moderately (highly) interconnected in returns and volatilities, while the metals display moderate returns but low volatility connections. Also, the DeFi tokens have extremely low return and volatility relations with traditional metals and green markets, suggesting significant potential for diversification. The total return (volatility) connectedness across all instruments is substantial (moderate) at 58.1% (45.2%). DeFi tokens and metals primarily act as net receivers of return and volatility, while S&P green markets are dominant net transmitters. The COVID-19 pandemic amplified transmissions across all instruments in early 2020. Given the findings, the study recommends that investors should capitalise on the low volatility relations among the instruments by strategically combining them to enhance the risk-adjusted returns of their portfolios.
