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Bitcoin market reactions to large price swings of international stock markets

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  • Jia, Boxiang
  • Shen, Dehua
  • Zhang, Wei

Abstract

This paper aims to investigate the linkage between Bitcoin market and stock markets. By employing high-frequency Bitcoin trading data, we find intraday Bitcoin price reversals following large price swings in stock markets, confirming the overreaction hypothesis. Specifically, Bitcoin market overreaction to developed stock markets is more prominent and persistent than that of the emerging stock markets. The subperiod analysis shows that network effect, investor sentiment, economic policy uncertainty, and investor attention, are crucial determinants of overreaction. These findings suggest the interdependence between the Bitcoin market and stock markets, which could provide hedge opportunities for international investors.

Suggested Citation

  • Jia, Boxiang & Shen, Dehua & Zhang, Wei, 2024. "Bitcoin market reactions to large price swings of international stock markets," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 72-88.
    • Handle: RePEc:eee:reveco:v:90:y:2024:i:c:p:72-88
    DOI: 10.1016/j.iref.2023.11.011
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    2. Li, Xiao & Wu, Ruoxi & Wang, Chen, 2024. "Impacts of bitcoin on monetary system: Is China's bitcoin ban necessary?," Research in International Business and Finance, Elsevier, vol. 69(C).

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