Author(s): Nemushungwa Azwifaneli Innocentia, Aluwani Malvin Rabinda
The growth of cryptocurrencies has transformed global finance, with Litecoin emerging as a prominent alternative to Bitcoin. Despite growing adoption in South Africa, empirical evidence on Litecoin?s role as a portfolio diversifier or hedging asset remains limited. This study examines the nonlinear and asymmetric relationship between Litecoin and two major South African equity indices?the All Share Index (ALSI) and JSE Industrial 25, using monthly data from January 2013 to May 2024. The Nonlinear Autoregressive Distributed Lag (NARDL) model, alongside Random Matrix Theory (RMT), was used to capture short and long-run asymmetries while filtering spurious correlations. Results reveal that Litecoin exhibits significant asymmetric impacts on both indices, with positive shocks exerting stronger effects than negative shocks, highlighting its potential as a diversification tool. In contrast, Bitcoin, Ethereum, and Ethereum Classic show limited or insignificant influence. The findings provide novel insights for investors, portfolio managers, and policymakers on leveraging Litecoin to enhance risk management and portfolio resilience in emerging markets.