Are Stock Markets and Cryptocurrencies Connected?

Umar, Muhammad; Hung, Ngo Thai; Chen, Shihua; Iqbal, Amjad; Jebran, Khalil

doi:10.1142/s0217590820470050

Cited by 42 publications

(30 citation statements)

References 27 publications

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“…Therefore, we can conclude that the majority of the stock prices respond more to the negative shocks of crypto-currencies than to the positive ones. Therefore, this result looks aligned with those of Baur and Dimpfl ( 2018 ), Umar et al ( 2020 ), Sami and Abdallah ( 2020 ), Kurka ( 2019 ), and Fakhfekh and Jeribi ( 2019 ), among others.…”

Section: Estimation Resultssupporting

confidence: 88%

“…For his part, Yang ( 2020 ) discovered that Taiwan’s stock market and Bitcoin have a significant nonlinear relationship. On the other hand, using the asymmetric DCC and wavelet coherence approaches, Umar et al ( 2020 ) examined the connectedness between five crypto-currencies, namely Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Ethereum Operating System, and five major stock markets, such as NYSE, NASDAQ, SSE, Nikkei 225, and Euronext NV. In fact, their results showed an important time-varying conditional association between the plurality of crypto-currencies and the stock market indices, indicating that negative shocks play a bigger role than positive shocks with the same dimension.…”

Section: Literature Reviewmentioning

confidence: 99%

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Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets

2022

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Using the NARDL model for the period of pandemic COVID19, we examined the asymmetric relationship between six crypto-currencies (Bitcoin, Litecoin, Bitcoin gold, Dash, Maker, and Ehereum) and seven stock market prices (S&P500, CAC40, DAX30, NIKKEI, FTSE, FTSEMIB, and SPTSX) accounting for the effects of Gold and WTI prices. In the long run, our results revealed, in most cases, a positive asymmetric relationship between digital and financial assets, suggesting a weak safe haven role for crypto-currencies. The oil price (WTI) was also found to act as a diversifier. However, for, the results revealed, in most cases, a negative asymmetric relationship between the yellow metal and the different stock prices, suggesting that gold can act as a good hedging instrument or a safe haven against stock prices in the long run. On the other hand, in the short run, the results indicate that only Bitcoin, Litecoin, and Maker have an asymmetric effect on the chosen stock prices but the effect is positive in most cases. Moreover, gold can act as a hedge/safe-haven asset in the short run. Finally, while examining the dynamic response of stock prices to the negative and positive shocks of crypto-currencies, we concluded that the majority of stock prices respond more to the negative shocks of crypto-currencies than to the positive ones.

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Section: Estimation Resultssupporting

confidence: 88%

Section: Literature Reviewmentioning

confidence: 99%

Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets

2022

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“…Generally, it can be observed from the plots that fluctuations in cryptocurrencies supersede those of global equities. is supports the assertion made by extant literature on the riskiness of cryptocurrencies as against equities [15,72,73].…”

Section: Resultssupporting

confidence: 87%

“…Similarly, Umar et al [72] posited that cryptocurrencies gained worldwide attention in 2017 after a significant increase in their value, resulting in investors shifting a large portion of their assets from traditional financial assets to cryptocurrencies.…”

Section: Information Flow Eorymentioning

confidence: 99%

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Information Flow between Global Equities and Cryptocurrencies: A VMD‐Based Entropy Evaluating Shocks from COVID‐19 Pandemic

2021

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The world has witnessed the adverse impact of the COVID-19 pandemic. Accordingly, it is expected that information transmission between equities and digital assets has been altered due to the hostile impact of the pandemic outbreak on financial markets. As a result, the ensuing perverse risk among markets is presumed to rise during severe uncertainties occasioned by the COVID-19 pandemic. The impetus of this study is to examine the degree of asymmetry and nonlinear directional causality between global equities and cryptocurrencies in the frequency domain. Hence, we employ both the variational mode decomposition (VMD) and the Rényi effective transfer entropy techniques. Analyses of the study are presented for three sample periods; these are the full sample period, the pre-COVID-19 period, and the COVID-19 pandemic period. We gauge a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between global equities and cryptocurrencies for the sample periods. However, the COVID-19 pandemic period appears to be driving the estimates for the full sample period, which indicates a negative flow. Thus, the direction and significance of the information flow between the markets for the full sample correspond to the one observed during the COVID-19 pandemic period. We, consequently, establish a significant directional, dynamical, and scale-dependent information flow between global equities and cryptocurrencies. Notwithstanding, throughout the study samples, we mainly find a negative significant information flow from global equities to cryptocurrencies. We detect that most cryptocurrencies exhibit similar behaviour of information flow to global equities for each of the sample periods. The outcome provides pertinent signals to investors with diverse investment horizons who would want to diversify, hedge, or employ cryptocurrencies as a safe haven for global equities during uncertainties, specifically the COVID-19 pandemic.

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Do cryptocurrencies integrate with the indices of equity, sustainability, clean energy, and crude oil? A wavelet coherency approach

Annamalaisamy

Jayaraman

2023

Int. J Fin Econ

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The paper examines market co‐movement between pairs of financial assets in the time‐frequency domain. Recent finance literature confirms the integration of cryptocurrencies and financial assets, which may bring more investments with the possibility of surplus liquidity in the cryptocurrency segment, leading to financial instability. The novelty of this paper is examining the integration of cryptocurrencies and the indices of equity, sustainability, renewable energy, and crude oil for the daily observations from 2015 to 2021 by using the wavelet coherency method. The empirical results signify no integration in the short‐term scales and grow stronger in the medium‐term scales, especially during the COVID‐19 period, and further exhibit weaker heterogeneous associations in the long‐term scales. However, the sustainability, clean energy indices follow similar dynamics of the equity market and crypto pairs. In contrast, the global crude oil index showcases the minor integration with cryptocurrencies compared with other traditional asset classes. Hence, the cryptocurrency market fails to confirm the safe haven features, especially during the COVID‐19 periods (Medium‐term), which facilitate the domestic and international investors expecting to hedge their price risk in equity markets using cryptocurrencies may have to look for short‐term. The lead–lag heterogeneous effects of the asset‐pairs may pave arbitrage opportunities for investors.

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Are Stock Markets and Cryptocurrencies Connected?

Cited by 42 publications

References 27 publications

Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets

Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets

Information Flow between Global Equities and Cryptocurrencies: A VMD‐Based Entropy Evaluating Shocks from COVID‐19 Pandemic

Do cryptocurrencies integrate with the indices of equity, sustainability, clean energy, and crude oil? A wavelet coherency approach

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