The Volatility Transmission Between Cryptocurrency And Global Stock Market Indices: Case Of Covid-19 Period

Abstract

The uncertainty originated by the COVID-19 pandemic and the unpredictability of both real and financial market indicators have increased the volatility of global financial markets. As a result of globalization, the determination of risk and information transfer between financial markets has gained importance during the pandemic process. In this context, the spread of volatility between the cryptocurrency market and the global stock markets was analyzed by considering the pandemic process. Bitcoin, which represents 42% of the total market cap, was used to represent the cryptocurrency market in the analysis. S&P500, FTSE100, SSEC and NIKKEI indices, which are among the world's leading indices in terms of market cap, were used to represent the global stock market. Constant Conditional Correlation Multivariate GARCH model was used for the analysis of volatility transmission. Daily closing prices covering the date range from 1st December 2019 to 1st July 202 were used for the analyses. The model results were positive and significant for all predicted conditional correlation parameters. In this context, there is volatility transmission and information transfer between BTC and stock returns. The model findings are expected to be a supporting element for financial market participants to make the right decision in the optimal portfolio allocation process.