Directional predictability and volatility spillover effect from stock market indexes to Bitcoin: evidence from developed and emerging markets

Imen Omri

Journal of Risk Finance, 2023, vol. 24, issue 2, 226-243

Abstract: Purpose - This paper aims to quantify the volatility spillover impact and the directional predictability from stock market indexes to Bitcoin. Design/methodology/approach - Daily data of 15 developed and 15 emerging stock markets are used for the period March 2017–December 2021.; The author uses vector autoregressive (VAR) model, Granger causality test and impulse response function (IRF) to estimate the results of the study. Findings - Empirical results show a significant unidirectional volatility spillover impact from emerging markets to Bitcoin and only six stock markets are powerful predictors of Bitcoin return in the short term. Additionally, there is no a difference between developed and developing markets regarding the directional predictability however there is difference in the reaction of Bitcoin return to shocks in the emerging markets compared to developed ones. Originality/value - The paper proposes different econometric techniques from prior research and presents a comparative analysis between developed and emerging markets.

Keywords: Granger causality; Impulse response function; Time series; Vector autoregressive model; Stock markets; Bitcoin; Cryptocurrency; Volatility spillover; Directional predictability; Financial contagion (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-06-2022-0130

DOI: 10.1108/JRF-06-2022-0130

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