The nexus between the volatility of Bitcoin, gold, and American stock markets during the COVID-19 pandemic: evidence from VAR-DCC-EGARCH and ANN models

Virginie Terraza (), Aslı Boru İpek and Mohammad Rounaghi ()
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Virginie Terraza: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier

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Abstract: The spread of the coronavirus has reduced the value of stock indexes, depressed energy and metals commodities prices including oil, and caused instability in financial markets around the world. Due to this situation, investors should consider investing in more secure assets, such as real estate property, cash, gold, and crypto assets. In recent years, among secure assets, cryptoassets are gaining more attention than traditional investments. This study compares the Bitcoin market, the gold market, and American stock indexes (S&P500, Nasdaq, and Dow Jones) before and during the COVID-19 pandemic. For this purpose, the dynamic conditional correlation exponential generalized autoregressive conditional heteroskedasticity model was used to estimate the DCC coefficient and compare this model with the artificial neural network approach to predict volatility of these markets. Our empirical findings showed a substantial dynamic conditional correlation between Bitcoin, gold, and stock markets. In particular, we observed that Bitcoin offered better diversification opportunities to reduce risks in key stock markets during the COVID-19 period. This paper provides practical impacts on risk management and portfolio diversification.

Keywords: JEL Classification: C22 C58 G17 Bitcoin market Gold market American stock markets COVID-19 pandemic VAR-DCC-EGARCH model ANN model; JEL Classification: C22; C58; G17 Bitcoin market; Gold market; American stock markets; COVID-19 pandemic; VAR-DCC-EGARCH model; ANN model (search for similar items in EconPapers)
Date: 2024-01-15
New Economics Papers: this item is included in nep-cmp, nep-fmk, nep-pay and nep-rmg
Note: View the original document on HAL open archive server: https://hal.umontpellier.fr/hal-04395168v1
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Published in Financial Innovation, 2024, 10, ⟨10.1186/s40854-023-00520-3⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04395168

DOI: 10.1186/s40854-023-00520-3

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