Dynamic connectedness between trading volumes and retail investor sentiment in the Russian stock market with Bitcoin during external shock periods

Maksim Fayzulin, Tamara Teplova and Aleksei Kurkin
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Maksim Fayzulin: HSE University, Moscow, Russian Federation
Tamara Teplova: HSE University, Moscow, Russian Federation
Aleksei Kurkin: HSE University, Moscow, Russian Federation

Applied Econometrics, 2025, vol. 79, 99-121

Abstract: The paper analyses the dynamic connectedness between trading volumes in the Russian stock market and the global cryptocurrency (Bitcoin) market during periods of external shocks (the COVID-19 crisis and the Russia-Ukraine conflict) from 2019. Using the TVP-VAR model and estimates of system variable connectivity, liquidity spillovers (cash flows) are identified between the considered asset classes. For the first time, we analyse the network connectedness of investor sentiment for the most popular Russian stocks and Bitcoin and estimate the role of sentiment in liquidity spillovers. The results demonstrate that Bitcoin’s daily trading volume predominantly acts as a recipient of shocks from the Russian stock market. Meanwhile, the overall coherence in the system was higher during the COVID-19 crisis period compared to the Special Military Operation (SMO). The study confirms the existence of a correlation between investor sentiment on the Russian stock and cryptocurrency markets. At the beginning of the analyzed period,in 2019, when interest in crypto assets investing began to grow rapidly, this correlation was strongly pronounced. There is a connectedness between two sentiment indices: on the stock market and crypto-assets. The intensity of the correlation prevails in the COVID-19 inception period, significantly exceeding the level observed in the SMO period. This sentiment metrics behaviour may imply adaptation of the Russian stock market to external shocks, as well as retail investors’ expectations of short-term SMO in early 2022.

Keywords: liquidity spillover; cryptocurrency market; stock market; investor sentiment; TVP-VAR. (search for similar items in EconPapers)
JEL-codes: C32 G11 G12 (search for similar items in EconPapers)
Date: 2025
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