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The Analysis Of Interdependencies Between Capital Market And Cryptocurrency Market

Author

Listed:
  • Josip Arneric

    (University of Zagreb)

  • Mladen Mateljan

    (University of Split)

Abstract

Cryptocurrency markets are emerging markets that are evolving in line with the development of information technology, and the possibility of capital outflows from traditional capital markets into cryptocurrency markets is emerging. The aim of this paper is to investigate the periods in which capital outflows from the capital market to the cryptocurrency market occur and whether cryptocurrencies can serve as a safe haven in turbulent periods. The theoretical part systematically describes the properties of cryptocurrencies as alternative forms of investment. The empirical section analyzes two leading representatives of the capital and cryptocurrency markets - the S&P500 and Bitcoin exchange index - using Engle's dynamic conditional correlation model. The results show that the correlation between the two markets is time-varying, with its largest negative values picking up in late 2015, mid-2016 and early 2017, just when the volatility of the S & P500 index was the highest. This confirms that the cryptocurrency market is a safe haven in periods of high volatility in the US capital market.

Suggested Citation

  • Josip Arneric & Mladen Mateljan, 2019. "The Analysis Of Interdependencies Between Capital Market And Cryptocurrency Market," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 28(2), pages 449-465, december.
    • Handle: RePEc:avo:emipdu:v:28:y:2019:i:2:p:449-465
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    More about this item

    Keywords

    cryptocurrency Bitcoin; index S&P500; safe haven; MGARCH; dynamic conditional correlation;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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