The asymmetric contagion effect between stock market and cryptocurrency market

Hao Wang, Xiaoqian Wang, Siyuan Yin and Hao Ji

Finance Research Letters, 2022, vol. 46, issue PA

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.

Keywords: Asymmetric contagion effect; Cryptocurrency market; Stock market; Time-varying SJC-Copula-GARCH model; Nonlinear Granger causality test (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002889

DOI: 10.1016/j.frl.2021.102345

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