Exploring portfolio diversification with alternative investments: An international TVP-VAR approach
Exploring portfolio diversification with alternative investments: An international TVP-VAR approach
This study examines the potential for portfolio diversification across a wide range of international assets, including equities, bonds, commodities, and alternatives like gold, Bitcoin, and real estate. Using 13 years of daily returns data from over 30 countries (MSCI indices) and employing time-varying parameter vector autoregressive (TVP-VAR) approach, we provide insights into the behavior of connectedness of these assets. The results indicate that the MSCI equity indices (i.e., MSCIWO, MSCNA, MSCIEU, MSCIPC) show strong interconnectedness and global influence, while bonds exhibit bidirectional volatility with equities. Brent and BCOM drive significant spillovers, especially to NG, while BDI remains isolated. Gold acts as a hedge, linking to commodities and bonds, whereas Bitcoin remains largely disconnected from traditional markets. These findings offer practical implications for investors, funds, banks, and policymakers seeking to optimize portfolio diversification.
Bitcoin, Global financial markets, Investing policies, Local gaussian correlation, Portfolio diversification
Tsioutsios, Alexandros
e81cb4f1-e255-4120-8afb-18c4b378bac3
Yarovaya, Larisa
2bd189e8-3bad-48b0-9d09-5d96a4132889
Dimitriou, Dimitrios
e7037411-6a81-4f3a-8cde-179b3dc1b690
Tsioutsios, Alexandros
e81cb4f1-e255-4120-8afb-18c4b378bac3
Yarovaya, Larisa
2bd189e8-3bad-48b0-9d09-5d96a4132889
Dimitriou, Dimitrios
e7037411-6a81-4f3a-8cde-179b3dc1b690
Tsioutsios, Alexandros, Yarovaya, Larisa and Dimitriou, Dimitrios
(2025)
Exploring portfolio diversification with alternative investments: An international TVP-VAR approach.
Research in International Business and Finance, 80, [103143].
(doi:10.1016/j.ribaf.2025.103143).
Abstract
This study examines the potential for portfolio diversification across a wide range of international assets, including equities, bonds, commodities, and alternatives like gold, Bitcoin, and real estate. Using 13 years of daily returns data from over 30 countries (MSCI indices) and employing time-varying parameter vector autoregressive (TVP-VAR) approach, we provide insights into the behavior of connectedness of these assets. The results indicate that the MSCI equity indices (i.e., MSCIWO, MSCNA, MSCIEU, MSCIPC) show strong interconnectedness and global influence, while bonds exhibit bidirectional volatility with equities. Brent and BCOM drive significant spillovers, especially to NG, while BDI remains isolated. Gold acts as a hedge, linking to commodities and bonds, whereas Bitcoin remains largely disconnected from traditional markets. These findings offer practical implications for investors, funds, banks, and policymakers seeking to optimize portfolio diversification.
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Accepted/In Press date: 21 September 2025
e-pub ahead of print date: 22 September 2025
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Publisher Copyright:
© 2025 The Authors
Keywords:
Bitcoin, Global financial markets, Investing policies, Local gaussian correlation, Portfolio diversification
Identifiers
Local EPrints ID: 507143
URI: http://eprints.soton.ac.uk/id/eprint/507143
ISSN: 0275-5319
PURE UUID: 56d98ea7-0250-40bc-af4d-1b9c7c7a8f21
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Date deposited: 27 Nov 2025 17:54
Last modified: 28 Nov 2025 02:54
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Author:
Alexandros Tsioutsios
Author:
Dimitrios Dimitriou
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