Testing for asymmetric non-linear short- and long-run relationships between crypto-currencies and stock markets

Achraf Ghorbel (), Wajdi Frikha and Yasmine Snene Manzli
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Achraf Ghorbel: University of Sfax
Wajdi Frikha: University of Sfax
Yasmine Snene Manzli: Monastir University

Eurasian Economic Review, 2022, vol. 12, issue 3, No 2, 387-425

Abstract: Abstract Using the NARDL model for the period of pandemic COVID19, we examined the asymmetric relationship between six crypto-currencies (Bitcoin, Litecoin, Bitcoin gold, Dash, Maker, and Ehereum) and seven stock market prices (S&P500, CAC40, DAX30, NIKKEI, FTSE, FTSEMIB, and SPTSX) accounting for the effects of Gold and WTI prices. In the long run, our results revealed, in most cases, a positive asymmetric relationship between digital and financial assets, suggesting a weak safe haven role for crypto-currencies. The oil price (WTI) was also found to act as a diversifier. However, for, the results revealed, in most cases, a negative asymmetric relationship between the yellow metal and the different stock prices, suggesting that gold can act as a good hedging instrument or a safe haven against stock prices in the long run. On the other hand, in the short run, the results indicate that only Bitcoin, Litecoin, and Maker have an asymmetric effect on the chosen stock prices but the effect is positive in most cases. Moreover, gold can act as a hedge/safe-haven asset in the short run. Finally, while examining the dynamic response of stock prices to the negative and positive shocks of crypto-currencies, we concluded that the majority of stock prices respond more to the negative shocks of crypto-currencies than to the positive ones.

Keywords: Asymmetry; Shock transmission; COVID-19; Cryptocurrencies; Stock prices; Gold; WTI; Safe-haven; Diversifier (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40822-022-00206-8

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