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From financial markets to Bitcoin markets: A fresh look at the contagion effect

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  • Roman Matkovskyy

    (ESC [Rennes] - ESC Rennes School of Business)

  • Akanksha Jalan

    (ESC [Rennes] - ESC Rennes School of Business)

Abstract

This article studies contagion effects between traditional financial markets, represented by five equity indices and the EUR, USD, GBP, and JPY centralized Bitcoin markets. We apply a regime switching skew-normal model of asset returns that distinguishes between linear and non-linear contagion and also structural breaks in the periods. We find significant contagion effects from financial to Bitcoin markets in terms of both correlation and co-skewness of market returns. Our results also indicate that during crisis periods, risk-averse investors tend to move away from risky Bitcoin markets towards safer financial markets.

Suggested Citation

  • Roman Matkovskyy & Akanksha Jalan, 2019. "From financial markets to Bitcoin markets: A fresh look at the contagion effect," Post-Print hal-02131637, HAL.
    • Handle: RePEc:hal:journl:hal-02131637
    DOI: 10.1016/j.frl.2019.04.007
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-02131637
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    References listed on IDEAS

    as
    1. Galina Hale & Arvind Krishnamurthy & Marianna Kudlyak & Patrick Shultz, 2018. "How Futures Trading Changed Bitcoin Prices," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
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    More about this item

    Keywords

    Financial markets; Bitcoin; Contagion; Regime switching skew-normal model (RSSN);
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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