Who raised from the abyss? A comparison between cryptocurrency and stock market dynamics during the COVID-19 pandemic

Rocco Caferra and David Vidal-Tomás

Finance Research Letters, 2021, vol. 43, issue C

Abstract: This research examines the behaviour of cryptocurrencies and stock markets during the COVID-19 pandemic through the wavelet coherence approach and Markov switching autoregressive model. Our results show a financial contagion in March, since both cryptocurrency and stock prices fell steeply. Despite this turn-down, cryptocurrencies promptly rebounded, while stock markets are trapped in the bear phase. In other words, we observe that the price dynamics during the pandemic depends on the type of the market. These findings are relevant for investors since some hedging properties can be found in the cryptocurrency response to such a drastic event.

Keywords: COVID-19; Cryptocurrencies; Stock markets; Co-movement; Hidden regimes (search for similar items in EconPapers)
JEL-codes: C58 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000350

DOI: 10.1016/j.frl.2021.101954

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