Market integration and volatility spillover across major East Asian stock and Bitcoin markets: an empirical assessment

Abstract

PurposeThis paper aims to provide new perspectives on the integration of East Asian stock markets and the dynamic volatility transmission to the Bitcoin market utilising daily data from 2014 to 2020.Design/methodology/approachThe authors undertake comprehensive analyses of the dependency dynamics, systemic risk and volatility spillover between major East Asian stock and Bitcoin markets. The authors employ a vine-copula-CoVaR framework and a VAR-BEKK-GARCH method with a Wald test.Findings(a) With exception of KS11 and N225; HSI and SSE; HSI and KS11, which have moderate dependence, dependencies among other markets are low. In terms of tail risk, the upper tail risk is more significant in capturing strong common variation. (b) Two-way and asymmetric risk spillover effects exist in all markets. The Hong Kong and Japanese stock markets have significant risk spillovers to other markets, and quite notably, the Chinese stock market is the largest recipient of systemic risk. However, the authors observe a more significant risk spillover from the Chinese stock market to the Bitcoin market. (c) The VAR-BEKK-GARCH results confirm that the Korean market is a significant emitter of volatility spillovers. The Bitcoin market does provide diversification benefits. Interestingly, the Chinese stock market has an intriguing relationship with Bitcoin. (d) An increase in spillovers in East Asia boosts spillovers to Bitcoin, but there is no intuitive effect of Bitcoin spillovers on East Asian spillovers.Originality/valueFor the first time, the authors examine the dynamic linkage between Bitcoin and the major East Asian stock markets.

The impact of bitcoin on gold, the volatility index (VIX), and dollar index (USDX): analysis based on VAR, SVAR, and wavelet coherence

“…Several studies have also focused on risk metrics and crypto portfolio construction. The degree of market integration and volatility spillover across major East Asian stock markets and BTC was investigated by Zeng and The impact of bitcoin on gold Ahmed (2022). Their findings reveal a significant influence between these markets, indicating the presence of cross-market linkages and interdependencies.…”

Interdependency Between Indian and US Market Indices: A Granger Causality Approach

“…A few studies are also being conducted on identifying the linkages between the crypto-currency market and the stock market [2,16,32]. The studies suggested a link between stock market returns and cryptocurrency.…”

“…The study also demonstrates lesser interdependency between the stock markets of the United States and Australia than the Japanese and Austrian stock markets, which are nonetheless somewhat interdependent. The author used the VAR-BEKK-GARCH method to demonstrate the interdependency between major East Asian markets and the bitcoin markets proposed by [32].…”

Chinese regions' participation in global value chains and the associated global transmission of export price and quantity shocks

“…1 On the other hand, value chains do not only connect countries in terms of their outcome levels but also their volatility. A small body of recent research considers such effects on a selected set of markets (see König et al, 2022;Kubinschi & Barnea, 2019;Liu et al, 2022;Pahl et al, 2022;Zeng & Ahmed, 2022). 2 The present paper contributes to the literature in three ways.…”

“…Liu et al (2022) present productivity growth in China and the United States. Zeng and Ahmed (2022) discuss the Bitcoin in East Asia. Pahl et al (2022) identify value‐chain‐related links in slumps of industrial output of developing economies.…”