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Abstract Unlike the current extensive literature, which discusses which assets can avoid the risks caused by the COVID-19 pandemic, this study examines whether the characteristics of different assets affect the extreme risk transmission of the COVID-19 crisis. This study explores the effects of COVID-19 pandemic–related risk factors (i.e., pandemic severity, pandemic regulations and policies, and vaccination-related variables) on the risk of extreme volatility in asset returns across eight assets. These eight assets belong to the following classes: virtual, financial, energy, commodities, and real assets. To consider the different possible aspects of the COVID-19 impact, this study adopts both empirical methods separately, considering variables related to the pandemic as exogenous shocks and endogenous factors. Using these methods, this study enabled a systematic analysis of the relationship between the features of different asset types and the effects of extreme risk transmission during the COVID-19 crisis. The results show that different types of asset markets are affected by different risk factors. Virtual and commodity assets do not exhibit extreme volatility induced by the COVID-19 pandemic. The energy market, including crude oil, is most affected by the negative impact of the severity of the pandemic, which is unfavorable for investment at the beginning of the pandemic. However, after vaccinations and pandemic regulations controlled the spread of infection, the recovery of the energy market made it more conducive to investment. In addition, this study explains the differences between the hedging characteristics of Bitcoin and gold. The findings of this study can help investors choose asset types systematically when faced with different shocks. |
