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The asymmetric contagion effect between stock market and cryptocurrency market

Author

Listed:
  • Wang, Hao
  • Wang, Xiaoqian
  • Yin, Siyuan
  • Ji, Hao

Abstract

This paper studies asymmetric contagion effects between stock and cryptocurrency markets. We implement the time-varying symmetrized Joe-Clayton copula GARCH model and Bai-Perron breakpoint test to explore dynamic correlations between the daily log-returns of the two markets in each time range. The asymmetric contagion effects between the two markets are studied using the non-linear Granger causality test. We also find that the lower tail dependences are more significant than the upper ones. Our findings can be used as a reference for supervisory authorities, and also provide insights on risk hedging for rational investors to avoid underestimating risk when building their portfolios.

Suggested Citation

  • Wang, Hao & Wang, Xiaoqian & Yin, Siyuan & Ji, Hao, 2022. "The asymmetric contagion effect between stock market and cryptocurrency market," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002889
    DOI: 10.1016/j.frl.2021.102345
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    References listed on IDEAS

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