IDEAS home Printed from https://ideas.repec.org/a/gam/jfinte/v3y2024i2p18-336d1416794.html
   My bibliography  Save this article

Cryptocurrency, Gold, and Stock Exchange Market Performance Correlation: Empirical Evidence

Author

Listed:
  • Kanellos Toudas

    (Department of Agricultural Business Administration & Supply Systems Management, Agricultural University of Athens, 118 55 Athens, Greece)

  • Démétrios Pafos

    (School of Social Sciences, Hellenic Open University, 263 35 Patras, Greece)

  • Paraskevi Boufounou

    (Department of Economics, National and Kapodistrian University of Athens, 106 79 Athens, Greece)

  • Athanasios Raptis

    (National School of Public Administration, Piraeus 211 Ave, 177 78 Athens, Greece)

Abstract

This paper examines the correlation between three prospective investing options: the Bitcoin cryptocurrency price, gold, and the Dow Jones stock index. The main research question is whether there is a causal effect of gold and the DWJ on Bitcoin and how this effect varies on time. The study begins with a background analysis that explains the definitions and operation of cryptocurrencies, followed by a brief overview of gold and its derivatives. In addition, a historical review of stock markets is provided, with a focus on the Dow Jones index. Then, a literature review follows. Daily data from three separate periods are used, each spanning four years. The first period, running from October 2014 to September 2018, provides an overview of the introduction of official cryptocurrency price data. The second period, running from Oct 2018 to Sept 2022, captures more recent trends preceding COVID-19. The third period, from January 2020 to December 2023, is the whole COVID-19 period with the initiation, embedded, and terminal phases. Classical inductive statistical methods (descriptive, correlations, multiple linear regression) as well as time series analysis methods (autocorrelation, cross-correlation, Granger causality tests, and ARIMA modeling) are used to analyze the data. Rigorous testing for autocorrelation, multicollinearity, and homoskedasticity is performed on the estimated models. The results show a correlation of Bitcoin with gold and the DWJ. This correlation varies over time, as in the first period the correlation mainly concerns the DWJ and in the second it mainly concerns gold. By using ARIMA models, it was possible to make a forecast in a time horizon of a few days. In addition, the structure of the forecasting mechanism of gold and DWJ on Bitcoin seems to have changed during the COVID-19 crisis. The findings suggest that future research should encompass a broader dataset, facilitating comprehensive comparisons and enhancing the reliability of the conclusions drawn.

Suggested Citation

  • Kanellos Toudas & Démétrios Pafos & Paraskevi Boufounou & Athanasios Raptis, 2024. "Cryptocurrency, Gold, and Stock Exchange Market Performance Correlation: Empirical Evidence," FinTech, MDPI, vol. 3(2), pages 1-13, June.
    • Handle: RePEc:gam:jfinte:v:3:y:2024:i:2:p:18-336:d:1416794
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2674-1032/3/2/18/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2674-1032/3/2/18/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Schilling, Linda & Uhlig, Harald, 2019. "Some simple bitcoin economics," Journal of Monetary Economics, Elsevier, vol. 106(C), pages 16-26.
    2. Gkillas, Konstantinos & Katsiampa, Paraskevi, 2018. "An application of extreme value theory to cryptocurrencies," Economics Letters, Elsevier, vol. 164(C), pages 109-111.
    3. Shafi Madhkar Alsubaie & Khaled H. Mahmoud & Ahmed Bossman & Emmanuel Asafo-Adjei & Stefan Cristian Gherghina, 2022. "Vulnerability of Sustainable Islamic Stock Returns to Implied Market Volatilities: An Asymmetric Approach," Discrete Dynamics in Nature and Society, Hindawi, vol. 2022, pages 1-22, July.
    4. Jia, Zhenzhen & Tiwari, Sunil & Zhou, Jianhua & Farooq, Muhammad Umar & Fareed, Zeeshan, 2023. "Asymmetric nexus between Bitcoin, gold resources and stock market returns: Novel findings from quantile estimates," Resources Policy, Elsevier, vol. 81(C).
    5. Ghazanfar Ali Abbasi & Lee Yin Tiew & Jinquan Tang & Yen-Nee Goh & Ramayah Thurasamy, 2021. "The adoption of cryptocurrency as a disruptive force: Deep learning-based dual stage structural equation modelling and artificial neural network analysis," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-26, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dunbar, Kwamie & Owusu-Amoako, Johnson, 2022. "Cryptocurrency returns under empirical asset pricing," International Review of Financial Analysis, Elsevier, vol. 82(C).
    2. Flori, Andrea, 2019. "News and subjective beliefs: A Bayesian approach to Bitcoin investments," Research in International Business and Finance, Elsevier, vol. 50(C), pages 336-356.
    3. Silky Vigg Kushwah & Shab Hundal & Payal Goel, 2024. "Unveiling Interconnectedness and Volatility Transmission: A Novel GARCH Analysis of Leading Global Cryptocurrencies," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 132-139, May.
    4. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Gabauer, David, 2019. "Cryptocurrency market contagion: Market uncertainty, market complexity, and dynamic portfolios," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 61(C), pages 37-51.
    5. Andrea Flori, 2019. "Cryptocurrencies In Finance: Review And Applications," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(05), pages 1-22, August.
    6. Parthajit Kayal & Purnima Rohilla, 2021. "Bitcoin in the economics and finance literature: a survey," SN Business & Economics, Springer, vol. 1(7), pages 1-21, July.
    7. Simplice A. Asongu & Nicholas M. Odhiambo, 2023. "Female unemployment, mobile money innovations and doing business by females," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-26, December.
    8. Huang, Guan-Ying & Gau, Yin-Feng & Wu, Zhen-Xing, 2022. "Price discovery in fiat currency and cryptocurrency markets," Finance Research Letters, Elsevier, vol. 47(PA).
    9. Chen, Xia & Miraz, Mahadi Hasan & Gazi, Md. Abu Issa & Rahaman, Md. Atikur & Habib, Md. Mamun & Hossain, Abu Ishaque, 2022. "Factors affecting cryptocurrency adoption in digital business transactions: The mediating role of customer satisfaction," Technology in Society, Elsevier, vol. 70(C).
    10. Lim, King Yoong & Liu, Chunping & Zhang, Shuonan, 2024. "Optimal central banking policies: Envisioning the post-digital yuan economy with loan prime rate-setting," Emerging Markets Review, Elsevier, vol. 59(C).
    11. Vesa Pursiainen & Jan Toczynski, 2023. "Retail Investors’ Cryptocurrency Investments," Swiss Finance Institute Research Paper Series 23-51, Swiss Finance Institute.
    12. Sofia Priazhkina & Samuel Palmer & Pablo Martín-Ramiro & Román Orús & Samuel Mugel & Vladimir Skavysh, 2024. "Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm," Staff Working Papers 24-17, Bank of Canada.
    13. Miklesh Prasad Yadav & Atul Kumar & Vidhi Tyagi, 2023. "Adaptive Market Hypothesis and Cointegration: An Evidence of the Cryptocurrency Market," Contemporary Studies in Economic and Financial Analysis, in: Smart Analytics, Artificial Intelligence and Sustainable Performance Management in a Global Digitalised Economy, volume 110, pages 27-43, Emerald Group Publishing Limited.
    14. Aurelio F. Bariviera & Ignasi Merediz‐Solà, 2021. "Where Do We Stand In Cryptocurrencies Economic Research? A Survey Based On Hybrid Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 377-407, April.
    15. Chen, Bin-xia & Sun, Yan-lin, 2024. "Risk characteristics and connectedness in cryptocurrency markets: New evidence from a non-linear framework," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    16. Harald Uhlig & Taojun Xie, 2020. "Parallel Digital Currencies and Sticky Prices," Working Papers 2020-188, Becker Friedman Institute for Research In Economics.
    17. Bertrand Crettez & Lisa Morhaim, 2022. "General equilibrium cryptocurrency pricing in an OLG model," Post-Print hal-04103599, HAL.
    18. Liu, Weiyi, 2019. "Portfolio diversification across cryptocurrencies," Finance Research Letters, Elsevier, vol. 29(C), pages 200-205.
    19. Alexis Derviz, 2019. "Coexistence of Physical and Crypto Assets in a Stochastic Endogenous Growth Model," Working Papers 2019/7, Czech National Bank.
    20. Rodney J. Garratt & Maarten R. C. van Oordt, 2023. "Why Fixed Costs Matter for Proof-of-Work–Based Cryptocurrencies," Management Science, INFORMS, vol. 69(11), pages 6482-6507, November.

    More about this item

    Keywords

    cryptocurrencies; bitcoin; gold; DWJ;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jfinte:v:3:y:2024:i:2:p:18-336:d:1416794. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.