Nonlinear tail dependence in cryptocurrency-stock market returns: The role of Bitcoin futures

Amine Lahiani, Ahmed Jeribi and Nabila Boukef Jlassi

Research in International Business and Finance, 2021, vol. 56, issue C

Abstract: We investigate the median and tail dependence between cryptocurrency and stock market returns of BRICS and Developed countries using a newly developed nonparametric cumulative measure of dependence over the period January 4, 2016 – December 31, 2019 as well as before and after the introduction of Bitcoin futures on December 17, 2017. The new measure is model-free and permits measuring tail risk. The results highlight the leading role of S&P500, Nasdaq and DAX 30 in predicting BRICS and developed countries’ stock market returns. Among BRICS countries, BVSP shows a starring role in predicting stock market returns. BSE 30 is the most predictor of cryptocurrencies, which have a little predictability on stock market returns. Ethereum has the leading role in predicting cryptocurrencies and stock market returns followed by Bitcoin. Tail dependence shows substantial role of S&P500, Nasdaq and BVSP in predicting stock market returns. Subsample analysis show the role of Bitcoin futures in reshaping the mean and tail dependence between cryptocurrency and stock market returns. Our results have important policy implications for portfolio managers, hedge funds and investors.

Keywords: Cryptocurrency; Stock market; Tail dependence; Tail risk; BRICS; Developed countries (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:56:y:2021:i:c:s0275531920309594

DOI: 10.1016/j.ribaf.2020.101351

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