Mosab I. Tabash, Suhaib Anagreh, Suzan Sameer Issa, Zokir Mamadiyarov, Mohammed Alnahhal, Silvi Asna Prestianawati
This study pioneers the investigation of how shocks are transmitted between the conditional volatility of U.S. sectoral equity markets and investor sentiment in Bitcoin–measured via fear and greed indices (BSI)–across both high- and low-frequency time scales. To achieve this, we adopt a connectedness framework in both time and frequency domains, grounded in the Generalized Vector Auto-regression methodology. Additionally, we implement the DCC-GARCH-t copula model to derive optimal portfolio allocations, with the objective of identifying effective strategies for hedging long-term fluctuations in Bitcoin returns through sectoral U.S. equities. Overall findings suggested that a shock in the conditional volatility of all the U.S. sectoral stock transmitted higher contribution of shocks of 36.91% in the long-term as compared with only 9.56% in the short-term toward the BSI. Whereas, in the short-term, BSI also transmitted the lower contribution of shocks of 5.70% as compared with 25.2% in the long-term toward all the U.S. sectoral stocks’ conditional volatility. Moreover, in the short-term (long-term), the U.S. sectoral stocks of Financials, Industries and Materials (Industries) received the lowest contributions of shocks from BSI. Ultimately, the results indicate that utilizing optimal portfolio weight strategy derived from the DCC-GARCH-t copula model yields superior hedging performance relative to conventional hedge ratio methods. Therefore, to hedge against Bitcoin’s long-term volatility, portfolios that include U.S. sectoral stocks from Health Care, Goods, Telecommunications and Financials exhibit superior hedging effectiveness of 94%, 93%, 93% and 92%, respectively. We offer comprehensive practical ramification for long-term stockholders, fund managers and speculators. © 2026 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
College of Business, Al Ain University, Al Ain, United Arab Emirates; Business Department, Higher Colleges of Technology, Dubai, United Arab Emirates; Faculty of Administrative and Financial Sciences, University of Petra, Amman, Jordan; Department of Economics, Mamun University, Khiva, Uzbekistan; Department of Finance and Tourism, Termez University of Economics and Service, Termez, Uzbekistan; Mechanical Engineering Department, American University of Ras Al Khaimah, Ras Al Khaimah, United Arab Emirates; Economics Department, Faculty of Economics and Business, Universitas Brawijaya, East Java, Malang City, Indonesia
