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Exploring the Dynamics of Equity and Cryptocurrency Markets: Fresh Evidence from the Russia–Ukraine War

Author

Listed:
  • Foued Hamouda

    (Higher Institute of Management of Tunis GEF2A-Lab)

  • Imran Yousaf

    (Wenzhou-Kean University
    Lebanese American University
    School of Business, The University of Jordan)

  • Muhammad Abubakr Naeem

    (Lebanese American University
    United Arab Emirates University)

Abstract

This study investigates the dynamic connectedness between equity and cryptocurrency markets using the Granger Causality Network and the Wavelet Coherence approaches. Using time series data from July 2021 to January 2023, results indicate that the causality effect increased significantly after the outbreak of geopolitical conflict. Cryptocurrency markets are highly influenced and mutually more connected with equity markets after February 2022. Results also indicate that the causality is more important in European countries and steadily increased as the war progressed. Nevertheless, there is no distinct indication of contagion in China's market. Of greater interest, it is revealed that cryptocurrencies do not offer a "safe haven" advantage during the war, especially in North America and GCC countries. Cryptocurrency-equity markets are fully integrated and moved together for at least 5 months after the beginning of the war. Overall, this paper provides early insight into the use of cryptocurrencies by investors and reveals how equity and cryptocurrency markets co-move within countries. These results are further supported by an alternative Structural Vector Autoregression model. This study provides useful insights to investors, regulators, and policy-makers regarding portfolio management, hedging, and financial market stability.

Suggested Citation

  • Foued Hamouda & Imran Yousaf & Muhammad Abubakr Naeem, 2024. "Exploring the Dynamics of Equity and Cryptocurrency Markets: Fresh Evidence from the Russia–Ukraine War," Computational Economics, Springer;Society for Computational Economics, vol. 64(6), pages 3555-3576, December.
    • Handle: RePEc:kap:compec:v:64:y:2024:i:6:d:10.1007_s10614-024-10573-w
    DOI: 10.1007/s10614-024-10573-w
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    More about this item

    Keywords

    Comovement; Financial contagion; Granger causality network; Wavelet coherence; World equity markets; Safe haven;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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