Dynamic Correlation and Portfolio Efficiency in Times of Political Upheaval

Our paper analyzes the impact of the 2024 U.S. presidential election and the subsequent regulatory and energy policy shifts on the dynamics of volatility, correlation, and connectedness among major cryptocurrencies (Bitcoin and Ethereum), DeFi tokens, NFTs, oil, and gold. Using univariate GARCH models, a multivariate DCCGARCH framework, and the R 2 decomposed connectedness approach, we show that the leading cryptocurrencies experience a pronounced postelection increase in comovement and interdependence, whereas DeFi tokens and NFTs remain more idiosyncratic and vulnerable to systemic shocks. Oil reacts primarily to U.S. energy policy announcements and geopolitical tensions, while gold remains structurally decoupled and continues to serve as a safehaven asset during periods of instability. Portfolio evaluation indicates that only the minimumvariance strategy delivers robust improvements in riskadjusted performance, in contrast to portfolios constructed on correlation or connectivitybased criteria. Overall, the findings highlight the central role of political shocks in shaping crossasset risk transmission.