Are Cryptocurrencies a Backstop for the Stock Market in a COVID-19-Led Financial Crisis? Evidence from the NARDL Approach

Jeribi, Ahmed; Jena, Sangram Keshari; Lahiani, Amine

doi:10.3390/ijfs9030033

Cited by 37 publications

(24 citation statements)

References 38 publications

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“…Fourth, the comovement patterns over the longer investment horizons (>128 days) reveal encouraging findings. The stock-Bitcoin coherence heatmaps corroborate the findings of [2,7] and [28] as they show the heat turns blue or even dark blue in some cases. The results indicate that Bitcoin can serve as a safe haven against the G7 stock markets during the pandemic [29], specifically for investors holding the cryptocurrency for a longer investment horizon.…”

Section: Wavelet Coherence Resultssupporting

confidence: 76%

“…Similarly, ref. [7] have discovered Bitcoin as a safe haven against equities in Brazil, South Africa, and Russia during the pandemic. Meanwhile, Dash and Ripple show safe haven properties against all BRICS stock markets during the pandemic (31 January 2020 to 17 September 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Investors typically resort to traditional safe haven assets like gold, crude oil, other commodities, or foreign currencies [1,5] and, only recently, to cryptocurrencies, to minimize their losses and risks [6]. Recent studies have shown the viability of cryptocurrencies as safe havens against stocks during the pandemic [2,7]. However, there is ample evidence against this finding [1, 8,9].…”

Section: Introductionmentioning

confidence: 99%

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Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

et al. 2022

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This paper estimates the comovement between two leading cryptocurrencies and the G7 stock markets. It then attempts to explain the comovement with the rational investment theory by examining whether it is driven by market uncertainty measures, public attention to COVID-19, and the government’s containment and health responses to COVID-19. Wavelet Coherence heatmaps show that the stock-cryptocurrency comovements increase significantly and positively during the pandemic, indicating that cryptocurrencies lose their safe haven properties against stocks during the heightened market uncertainties. Over the longer investment horizons, Bitcoin reemerges as a safe haven or strong hedger while Ethereum’s properties weaken. Seemingly Unrelated Regression results reveal that the stock-cryptocurrency comovements are rationally explained by market uncertainties, government responses to COVID-19, and market fundamentals. However, the comovements are also driven by the fear of COVID-19 to a certain extent. Our findings offer valuable insights for investors considering cryptocurrencies to rebalance their equity portfolios during market distress. For policymakers, the Economic Policy Uncertainty (EPU) results suggest that government policies and regulatory frameworks can be used to regulate speculation and investment activities in the cryptocurrency market.

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Section: Wavelet Coherence Resultssupporting

confidence: 76%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

et al. 2022

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“…Moreover, Jeribi et al ( 2021 ) studied the relationship dynamics of stock markets and crypto-currency returns both in the short and long run with a special focus on changes during the COVID-19 crisis period. Their results indicated that Dash and Ripple are found to be a safe haven for stock markets before the pandemic.…”

Section: Introductionmentioning

confidence: 99%

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

2022

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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.

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“…The author found the time-varying linearity specification of the LMM (Tv-LMM) favorable in terms of modeling & forecasting performance of cryptocurrency price and CCI30 index. Jeribi et al (2021) examined the price data of Bitcoin, Ethereum, Dash, Monero, Ripple, and gold from January 31, 2020, to September 17, 2020, to compare the pre-crisis period from January 01, 2016, to January 30, 2020. They conclude that the short and long-term dynamics of the stock market and cryptocurrency returns are changing during the pandemic.…”

Section: Review Of Literaturementioning

confidence: 99%

Impacts of the global pandemic on returns and volatilities of cryptocurrencies

Kumar

Kumari

2022

IJABF

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Employing the standard event study methodology and the OLS market model to examine how the global pandemic announcement impacted cryptocurrencies, we test the null hypotheses that "the global pandemic declaration did not significantly impact the abnormal returns of the cryptocurrencies", and "during the global pandemic declaration, the cryptocurrencies did not experience any significant abnormal volatilities". The average abnormal return on t-2 was nearly minus 40 percent, which is the highest negative value during the 61-day event window. The cumulative average returns are significantly negative during the event window. The global pandemic news has significantly impacted cryptocurrencies and are more volatile during the outbreak. The study's findings will empower the investors to implement proper investment strategies during emergencies.

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Are Cryptocurrencies a Backstop for the Stock Market in a COVID-19-Led Financial Crisis? Evidence from the NARDL Approach

Cited by 37 publications

References 38 publications

Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

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

Impacts of the global pandemic on returns and volatilities of cryptocurrencies

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