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<p>The growth of decentralized finance (DeFi) and sustainability-linked investment markets has been rapid. This, alongside an unprecedented succession of global crises, has created an urgent need to comprehend the propagation of risk across financial markets and its portfolio implications. This study examines the evolution of volatility spillovers and dynamic conditional correlations, as well as the optimal portfolio construction implications, across DeFi, green, ESG, SDG, New Economy, and biodiversity markets from June 24, 2019, to April 17, 2025. Unlike existing studies, which have individually examined DeFi-currency linkages, green bond-equity spillovers, DeFi-commodity interactions, and ESG-focused connectedness in the context of a single crisis episode, the present study’s novelty lies not only in its joint exploration of volatility connectedness and portfolio optimization across these six distinct yet interlinked market categories, but also in its integration of the dynamics of four structurally distinct crisis episodes: COVID-19 health crisis, Russia-Ukraine war, 2023 banking crisis, and 2025 US policy shifts. The study uses daily prices for ten instruments—including three DeFi tokens (Chainlink, Maker, Basic Attention Token), three green market indices (S&amp;P Kensho Clean Energy, Cleantech, and Green Bond), and four sustainability indices (S&amp;P 500 ESG Elite, SDG, New Economies Composite, and Biodiversity)—and employs the Diebold–Yilmaz and DCC-GARCH models. Empirical results reveal that DeFi-only and green-only market connections are moderate; DeFi-sustainable market linkages are low; ESG/SDG-New Economy/biodiversity interconnections are high; DeFi tokens and green markets serve as net volatility receivers; ESG, SDG, New Economy, and biodiversity markets operate as net transmitters; the Total Connectedness Index is 60.6%; near-zero or negative weights are consistently allocated to DeFi assets, while sustainability instruments receive dominant weights, in cross-category portfolios, confirming that mixed portfolios generate risk-adjusted returns which are superior to those of single-category holdings—a benefit that is resilient even during-crisis periods; and the COVID-19 pandemic generated the strongest cross-market spillovers, while the 2025 US policy shifts generated the weakest. Given these findings, policymakers should monitor the primary systemic risk transmitters (ESG, SDG, New Economy, and biodiversity markets), while investors should pair DeFi with sustainable assets and prioritize governance tokens during stress periods.</p> Graphical abstract <p></p>

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Cross-domain volatility connectedness and portfolio optimization among DeFi, ESG, biodiversity, and new economy markets: evidence from multiple global crises

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年8月5日

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  • Shikha Daga,
  • Remy Jonkam Oben,
  • Mehdi Seraj,
  • Şerife Zihni Eyüpoğlu

摘要

The growth of decentralized finance (DeFi) and sustainability-linked investment markets has been rapid. This, alongside an unprecedented succession of global crises, has created an urgent need to comprehend the propagation of risk across financial markets and its portfolio implications. This study examines the evolution of volatility spillovers and dynamic conditional correlations, as well as the optimal portfolio construction implications, across DeFi, green, ESG, SDG, New Economy, and biodiversity markets from June 24, 2019, to April 17, 2025. Unlike existing studies, which have individually examined DeFi-currency linkages, green bond-equity spillovers, DeFi-commodity interactions, and ESG-focused connectedness in the context of a single crisis episode, the present study’s novelty lies not only in its joint exploration of volatility connectedness and portfolio optimization across these six distinct yet interlinked market categories, but also in its integration of the dynamics of four structurally distinct crisis episodes: COVID-19 health crisis, Russia-Ukraine war, 2023 banking crisis, and 2025 US policy shifts. The study uses daily prices for ten instruments—including three DeFi tokens (Chainlink, Maker, Basic Attention Token), three green market indices (S&P Kensho Clean Energy, Cleantech, and Green Bond), and four sustainability indices (S&P 500 ESG Elite, SDG, New Economies Composite, and Biodiversity)—and employs the Diebold–Yilmaz and DCC-GARCH models. Empirical results reveal that DeFi-only and green-only market connections are moderate; DeFi-sustainable market linkages are low; ESG/SDG-New Economy/biodiversity interconnections are high; DeFi tokens and green markets serve as net volatility receivers; ESG, SDG, New Economy, and biodiversity markets operate as net transmitters; the Total Connectedness Index is 60.6%; near-zero or negative weights are consistently allocated to DeFi assets, while sustainability instruments receive dominant weights, in cross-category portfolios, confirming that mixed portfolios generate risk-adjusted returns which are superior to those of single-category holdings—a benefit that is resilient even during-crisis periods; and the COVID-19 pandemic generated the strongest cross-market spillovers, while the 2025 US policy shifts generated the weakest. Given these findings, policymakers should monitor the primary systemic risk transmitters (ESG, SDG, New Economy, and biodiversity markets), while investors should pair DeFi with sustainable assets and prioritize governance tokens during stress periods.

Graphical abstract