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The Relationship between Stock Returns, Bitcoin Returns, and Risk Aversion: Evidence from a Multivariate GARCH Model

Author

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  • Ayşen SİVRİKAYA
  • Perihan İREN
  • Tolga OMAY

Abstract

This study explores the relationship between the U.S. stock returns, Bitcoin returns and their uncertainties by using a multivariate GARCH model. Specifically, the study compares the reactions of Bitcoin and stock market returns in the presence of global uncertainties and changes in risk appetites. The results show that even though reactions of Bitcoin and stock returns are similar for some highly volatile or risk averse periods, the association between the two returns is not sustainable. Moreover, the U.S. stock market investors are found to be risk averse throughout the entire sample period while Bitcoin investors are not.

Suggested Citation

  • Ayşen SİVRİKAYA & Perihan İREN & Tolga OMAY, 2021. "The Relationship between Stock Returns, Bitcoin Returns, and Risk Aversion: Evidence from a Multivariate GARCH Model," Sosyoekonomi Journal, Sosyoekonomi Society.
    • Handle: RePEc:sos:sosjrn:210105
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    Keywords

    Multivariate GARCH-M; U.S. Stock Price Return; Bitcoin Price Return; Uncertainty; Volatility; World Risk Aversion Index; World Macroeconomic Uncertainty Index. Issue: 29(47);
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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