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Dynamic correlation and hedging strategy between Bitcoin prices and stock market during the Russo-Ukrainian war

Author

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  • Mariem Gaies

    (Manouba University)

  • Walid Chkili

    (University of Tunis ElManar)

Abstract

This paper examines the dynamic relationship between stock market and Bitcoin volatilities during the recent geo-political event of the Russo-Ukrainian war. Using the ADCC–GARCH model, empirical results show that volatility of the two markets has rose significantly during the event. More interestingly the dynamic correlation increases during the Russia’s invasion of Ukraine indicating that Bitcoin has failed to play the role of safe haven during this period. In portfolio context, our finding reveals that adding Bitcoin to portfolio of stocks reduce the risk without lowering the expected returns. Finally, referring to hedging ratio, we find that hedging strategy leads higher cost during the war.

Suggested Citation

  • Mariem Gaies & Walid Chkili, 2023. "Dynamic correlation and hedging strategy between Bitcoin prices and stock market during the Russo-Ukrainian war," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 307-319, June.
    • Handle: RePEc:spr:eurase:v:13:y:2023:i:2:d:10.1007_s40822-023-00231-1
    DOI: 10.1007/s40822-023-00231-1
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    More about this item

    Keywords

    Russia–Ukraine war; Stock market; Bitcoin; Correlation; Safe haven;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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