Connectedness between communication digital assets and communication stock markets: Implications for portfolio design and hedging performance

This research aims to examine the connectedness and portfolio effects between communication cryptocurrencies and stock indices. The connectedness between assets is analyzed using the quantile time-frequency connectedness methodology. The results indicate a connectedness structure that differs depending on market regimes. Communication indices and communication cryptocurrencies are not related in normal market conditions. However, under extreme market conditions, the linkages between assets strengthen considerably and exhibit pronounced tail dependence. Under all market scenarios, both the interconnection structure among assets and their net spillover dynamics are amplified in the short term, with spillovers being heterogeneous across different frequencies. Two-asset portfolio applications and multivariate portfolio applications (MVP, MCP, and MCoP) demonstrate that communication cryptocurrencies do not provide diversification advantages for communication indices, and adding these assets to portfolios is not a rational strategy. Overall, the study provides novel quantile- and frequency-based evidence on the connectedness structure of sector-focused digital assets and offers directly applicable insights for practitioners engaged in portfolio management and investment decision-making.