Are cryptocurrencies contagious to Asian financial markets?

Rangga Handika, Gatot Soepriyanto and Shinta Amalina Hazrati Havidz

Research in International Business and Finance, 2019, vol. 50, issue C, 416-429

Abstract: Despite numerous studies on financial contagion over the last few decades, the definition of financial contagion is not universally accepted. Furthermore, economic studies on cryptocurrency are limited. This research presents a pioneering study investigating cryptocurrencies contagion in the Asian financial markets. We use three methods of measuring contagions. The first method adjusts the bias in the correlation coefficient. The second method identifies exceedances (extreme return) and performs a multinomial logistic regression to explain the coexceedances. Finally, we also use a vector autoregression (VAR) system. We documented evidence that the (unadjusted) correlation coefficients between five cryptocurrencies and thirteen Asian financial markets tended to be low in both high and low variance periods. After adjusting the bias in the correlation coefficient, we found that there was no longer evidence of a significant change in the magnitude of the propagation mechanism from five cryptocurrencies to Asian foreign exchange and stock markets. Using a multinomial logit analysis, we also acknowledged that cryptocurrencies tended to be statistically insignificant determinants for both positive and negative coexceedances. Our third contagion analysis using a VAR system further revealed that cryptocurrencies tended to be statistically insignificant determinants explaining the current Asian financial market change variables. Our results suggest that cryptocurrencies do not possess a systemic risk to the Asian financial markets.

Keywords: Cryptocurrencies; Contagion; Multinomial logit; Vector autoregression; Systemic risk (search for similar items in EconPapers)
JEL-codes: G01 G14 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:50:y:2019:i:c:p:416-429

DOI: 10.1016/j.ribaf.2019.06.007

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