Abstract
This study investigates the contagion dynamics between the MSCI indices and digital and traditional assets with the goal of distinguishing between temporal contagion and structural interdependence. This study decomposes correlations across time-frequency domains using the Maximal Overlap Discrete Wavelet Transform (MODWT) and a multi-layered, wavelet-based methodology that includes bivariate, multivariate, and quadruple wavelet coherence to differentiate between short-term and long-term interactions. Lastly, the Wavelet Local Multiple Correlation (WLMC) reveals which digital or traditional assets are dominant within a group. The bivariate wavelet findings show that the stock indices typically drive contagion, with both digital and traditional assets displaying short-term contagion amid significant crises like the COVID-19 pandemic and the geopolitical crisis of 2022. On the other hand, gold and stablecoins have the weakest coherence with the MSCI indices. Over the long term, rising coherence suggests a deeper integration of traditional and digital assets with international stocks. The multivariate wavelet results show that contagion is amplified, implying that when assets with comparable attributes are combined, the coherence is intensified. The dominance study demonstrates that, although gold and Bitcoin can occasionally serve as limited protective measures, they do not serve as a safe haven. The results suggest that rather than providing constant crisis protection, both digital and traditional assets display conditional and time-varying safe haven behaviour. These findings have important policy ramifications: In emerging markets, central banks and financial authorities ought to improve systemic resilience. However, in response to changing interdependencies, portfolio managers should implement dynamic, adaptive risk management and asset-allocation techniques.