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

Directional predictability and volatility spillover effect from stock market indexes to Bitcoin:... This paper aims to quantify the volatility spillover impact and the directional predictability from stock market indexes to Bitcoin.Design/methodology/approachDaily 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.FindingsEmpirical 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/valueThe paper proposes different econometric techniques from prior research and presents a comparative analysis between developed and emerging markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Risk Finance Emerald Publishing

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

Omri, Imen
The Journal of Risk Finance , Volume 24 (2): 18 – Mar 10, 2023
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References (50)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1526-5943
DOI
10.1108/jrf-06-2022-0130
Publisher site
See Article on Publisher Site

Abstract

This paper aims to quantify the volatility spillover impact and the directional predictability from stock market indexes to Bitcoin.Design/methodology/approachDaily 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.FindingsEmpirical 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/valueThe paper proposes different econometric techniques from prior research and presents a comparative analysis between developed and emerging markets.

Journal

The Journal of Risk Finance – Emerald Publishing

Published: Mar 10, 2023

Keywords: Granger causality; Impulse response function; Time series; Vector autoregressive model; Stock markets; Bitcoin; Cryptocurrency; Volatility spillover; Directional predictability; Financial contagion

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