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Dynamic connectedness between trading volumes and retail investor sentiment in the Russian stock market with Bitcoin during external shock periods

Author

Listed:
  • Maksim Fayzulin

    (HSE University, Moscow, Russian Federation)

  • Tamara Teplova

    (HSE University, Moscow, Russian Federation)

  • Aleksei Kurkin

    (HSE University, Moscow, Russian Federation)

Abstract

The paper analyses the dynamic connectedness between trading volumes in the Russian stock market and the global cryptocurrency (Bitcoin) market during periods of external shocks (the COVID-19 crisis and the Russia-Ukraine conflict) from 2019. Using the TVP-VAR model and estimates of system variable connectivity, liquidity spillovers (cash flows) are identified between the considered asset classes. For the first time, we analyse the network connectedness of investor sentiment for the most popular Russian stocks and Bitcoin and estimate the role of sentiment in liquidity spillovers. The results demonstrate that Bitcoin’s daily trading volume predominantly acts as a recipient of shocks from the Russian stock market. Meanwhile, the overall coherence in the system was higher during the COVID-19 crisis period compared to the Special Military Operation (SMO). The study confirms the existence of a correlation between investor sentiment on the Russian stock and cryptocurrency markets. At the beginning of the analyzed period,in 2019, when interest in crypto assets investing began to grow rapidly, this correlation was strongly pronounced. There is a connectedness between two sentiment indices: on the stock market and crypto-assets. The intensity of the correlation prevails in the COVID-19 inception period, significantly exceeding the level observed in the SMO period. This sentiment metrics behaviour may imply adaptation of the Russian stock market to external shocks, as well as retail investors’ expectations of short-term SMO in early 2022.

Suggested Citation

  • Maksim Fayzulin & Tamara Teplova & Aleksei Kurkin, 2025. "Dynamic connectedness between trading volumes and retail investor sentiment in the Russian stock market with Bitcoin during external shock periods," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 79, pages 99-121.
    • Handle: RePEc:ris:apltrx:021523
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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