Do bitcoin shocks truly Cointegrate with financial and commodity markets?

Mustafa Özer, Michael Frömmel, Melik Kamişli and Darko B. Vuković

International Review of Financial Analysis, 2024, vol. 95, issue PA

Abstract: This study examines the long-run relationships between Bitcoin and various financial and commodity markets. Utilizing a novel methodology termed the Implicit Asymmetric Combined Cointegration Test (IACC), an augmented variant of the Bayer Hanck combined cointegration method (BH), this research applies ten-minute frequency time series data to test asymmetric shocks associated with Bitcoin, stock markets, futures indices, sectoral stock indices, Islamic stocks, commodities, and foreign exchange markets. The principal finding reveals a hidden cointegration between negative Bitcoin shocks and both negative and positive shocks in almost all examined financial instruments, indicating an absence of decoupling in the connections between Bitcoin shocks and other financial instrument shocks. The study demonstrates Bitcoin's centrality in financial investments and establishes long-run relationships between Bitcoin price shocks and those of other financial instruments. The findings suggest caution for participants in both financial and commodity markets, as Bitcoin emerges as a major source of the recent volatility observed in these instruments' prices.

Keywords: Bitcoin; Asymmetric shocks; Commodity market; Financial instruments; The implicit asymmetric combined cointegration test (search for similar items in EconPapers)
JEL-codes: C58 D53 F31 G11 Q2 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pa:s1057521924002862

DOI: 10.1016/j.irfa.2024.103354

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