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Cryptocurrency in the East: Exploring Ethereum's Link to Asian-Pacific Stock Indices through Multivariate-GARCH Approach

Author

Listed:
  • Tan, Zi Ling
  • Lim, Siok Jin

Abstract

This study investigates the dynamic interrelationship between Ethereum and key stock indices in the Asian-Pacific region, focusing on its potential role as a diversification tool for equity investors. Utilizing a Multivariate Generalized Autoregressive Conditional Heteroskedasticity Dynamic Conditional Correlation (MGARCH-DCC) model, we analyse daily closing prices from November 2018 to November 2023 across four developed Asian stock markets—China, Hong Kong, Japan, and Malaysia—alongside Ethereum. The findings reveal that Ethereum exhibits distinctive volatility patterns compared to traditional stock indices, with conditional correlations fluctuating significantly over time. Notably, Ethereum demonstrates weak correlations with Malaysian stocks, suggesting potential diversification benefits for investors in this market. The study contributes to the growing literature on cryptocurrency's financial integration, offering insights into the hedging properties of Ethereum amidst evolving market dynamics in the Asian-Pacific region.

Suggested Citation

  • Tan, Zi Ling & Lim, Siok Jin, 2023. "Cryptocurrency in the East: Exploring Ethereum's Link to Asian-Pacific Stock Indices through Multivariate-GARCH Approach," MPRA Paper 121786, University Library of Munich, Germany, revised 2024.
    • Handle: RePEc:pra:mprapa:121786
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    File URL: https://mpra.ub.uni-muenchen.de/121786/1/MPRA_paper_121786.pdf
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    References listed on IDEAS

    as
    1. Siok Jin Lim & Andaeus Zun Khan Neoh, 2023. "Does Bitcoin Provide a Hedge to Islamic Stock Markets During and Post-COVID-19 Outbreak? Evidence From Asia Based on a Multivariate-GARCH Approach," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 4(2), pages 1-7.
    2. Didik Susilo & Sugeng Wahyudi & Irene Rini Demi Pangestuti & Bayu Adi Nugroho & Robiyanto Robiyanto, 2020. "Cryptocurrencies: Hedging Opportunities From Domestic Perspectives in Southeast Asia Emerging Markets," SAGE Open, , vol. 10(4), pages 21582440209, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Ethereum; Asian-Pacific stock indices; Multivariate-GARCH; Dynamic Conditional Correlation (DCC); Cryptocurrency; Financial integration; Diversification; Volatility; Hedging; Emerging markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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