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Asymmetric Tail Risk Spillovers between Stock and Bitcoin Markets: A TGARCH-Based GCIR Approach

Author

Listed:
  • Xubiao He
  • Meiyu Huang
  • Dongming Jiang

Abstract

This paper presents a novel examination of asymmetric tail risk spillovers between stock and Bitcoin markets, combining TGARCH and Granger causality in risk approach. We investigate the causal relationships between downside and upside risks of Bitcoin and eight stock markets, which include indices from G7 countries and China. Our analysis of down-to-up spillover effects reveals a unidirectional causality from stock markets to Bitcoin (gold). Additionally, cross-market correlation analysis indicates that extreme downturns in stock markets significantly trigger uptrends in Bitcoin, illustrating a ‘flight-to-quality’ phenomenon. Furthermore, the findings suggest that G7 countries exhibit notably enhanced short-term asymmetric dynamic spillover effects with Bitcoin compared to the Chinese stock market, particularly under the influence of pandemic factors. In a broader context, while gold remains a stable safe haven, Bitcoin emerges as a short-term hedge asset in certain countries and specific periods, countering extreme downturns in the stock market.

Suggested Citation

  • Xubiao He & Meiyu Huang & Dongming Jiang, 2025. "Asymmetric Tail Risk Spillovers between Stock and Bitcoin Markets: A TGARCH-Based GCIR Approach," International Economic Journal, Taylor & Francis Journals, vol. 39(4), pages 651-675, October.
    • Handle: RePEc:taf:intecj:v:39:y:2025:i:4:p:651-675
    DOI: 10.1080/10168737.2025.2553094
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