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Open Access
Article
Publication date: 18 May 2021

Ngo Thai Hung

This study examines the inter-linkages between Bitcoin prices and CEE stock markets (Hungary, the Czech Republic, Poland, Romania and Croatia).

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Abstract

Purpose

This study examines the inter-linkages between Bitcoin prices and CEE stock markets (Hungary, the Czech Republic, Poland, Romania and Croatia).

Design/methodology/approach

The dynamic contemporaneous nexus has been analyzed using both the multivariate DECO-GARCH model proposed by Engle and Kelly (2012) and quantile on quantile (QQ) methodology proposed by Sim and Zhou (2015). Our study is implemented using the daily data spanning from 6 September 2012 to 12 August 2019.

Findings

First, the findings show that the average return equicorrelation across Bitcoin prices and CEE stock indices are positive, even though it is found to be time-varying over the research period shown. Second, the Bitcoin-CEE stock market association has positive signs for most pairs of quantiles of both variables and represents a rather similar pattern for the cases of Poland, the Czech Republic and Croatia. However, a weaker and primarily negative connectedness is found for Hungary and Romania, respectively. Furthermore, the interconnectedness between the co-movements in the Bitcoin market and stock returns changes significantly across quantiles of both variables within each nation, indicating that the Bitcoin-stock market relationship is dependent on both the cycle of the stock market and the nature of Bitcoin price shocks.

Practical implications

The evidence documented in this study has significant implications for divergent economic agents, including global investors, risk managers and policymakers, who would benefit from a comprehensive knowledge of the Bitcoin-stock market relationship to build efficient risk-hedging models and to conduct appropriate policy reactions to information spillover effects in different time horizons.

Originality/value

This paper is the first study employing both the multivariate DECO-GARCH model and QQ methodology to shed light on the nexus between Bitcoin prices and the stock markets in CEE countries. The DECO model uses more information to compute dynamic correlations between each pair of returns than standard dynamic conditional correlation (DCC) models, declining the estimation noise of the correlations. Besides, QQ approach allows us to capture some nuanced features of the Bitcoin-stock market relationship and explore the interdependence in its entirely. Therefore, the main contribution of this article to the related literature in this field is significant.

研究目的

本研究旨在探討比特幣的價格與中東歐股市(匈牙利、捷克共和國、波蘭、羅馬尼亞和克羅地亞) 之相互聯繫.

研究設計/方法/理念

研究使用恩格爾與凱利(2012)(Engle and Kelly (2012)) 提出的多變量DECO-GARCH模型及Sim 與Zhou(2015)(Sim and Zhou ( 2015)) 研製的分位數-分位數方法來分析動態同期的聯繫。我們的研究使用由2012年9月6日至2019年8月12日期間取得的每日數據來進行.

研究結果

首先、研究結果顯示、跨比特幣價格與中東歐股價指數的平均回報當量關聯是正相關的,即使在研究期間被發現是隨時間而變化的。第二、比特幣與中東歐股市之聯繫在大多數兩變數分位數對而言出現正相關跡象,而且,這聯繫在波蘭、捷克共和國及克羅地亞而言表現一個頗相似的模式。唯就匈牙利而言、這聯繫則較弱、而羅馬尼亞則主要是負聯繫。研究結果亦顯示: 比特幣市場內的聯動與股票回報間之內在關聯會在每個國家內跨兩個變數的分位數而顯著地改變,這顯示比特幣-股市關係是取決於股市的週期和比特幣價格衝擊的本質.

實際的意義

本研究所記載的證據、對不同的經濟行為者而言極具意義 (這包括國際投資者、風險管理經理和政策制定者),因他們會受惠於對比特幣-股市關係的全面認識,他們可建立有效的風險對沖模型、及在不同時間範圍對資訊溢出效應進行適當的政策反應.

研究的原創性/價值

本文為首個研究使用多變量DECO-GARCH模型和分位數-分位數(QQ)方法、來解釋比特幣價格與中東歐國家之股市的關係。這DECO模型使用比標準動態條件關係模型更多資訊,來計算每對回報間之動態關係,這能減少估測雜訊,而且,QQ方法讓我們可以取得比特幣-股市關係的一些細微特徵及全面地探索其相互依賴性。因此,本文的主要貢獻是在這學術領域內有關的文獻上.

Details

European Journal of Management and Business Economics, vol. 30 no. 2
Type: Research Article
ISSN: 2444-8451

Keywords

Open Access
Article
Publication date: 6 September 2019

Ngo Thai Hung

The purpose of this paper is to examine the conditional correlations and spillovers of volatilities across CEE markets, namely, Hungary, Poland, the Czech Republic, Romania and…

2459

Abstract

Purpose

The purpose of this paper is to examine the conditional correlations and spillovers of volatilities across CEE markets, namely, Hungary, Poland, the Czech Republic, Romania and Croatia, in the post-2007 financial crisis period.

Design/methodology/approach

The authors use five-dimensional GARCH-BEKK alongside with the CCC and DCC models.

Findings

The estimation results of the three models generally demonstrate that the correlations between these markets are particularly significant. Also, own-volatility spillovers are generally lower than cross-volatility spillovers for all markets.

Practical implications

These results recommend that investors should take caution when investing in the CEE equity markets as well as diversifying their portfolios so as to minimize risk.

Originality/value

Unlike the previous studies in this field, this paper is the first study using multivariate GARCH-BEKK alongside with CCC and DCC models. The study makes an outstanding contribution to the existing literature on spillover effects and conditional correlations in the CEE financial stock markets.

Details

European Journal of Management and Business Economics, vol. 29 no. 1
Type: Research Article
ISSN: 2444-8494

Keywords

Open Access
Article
Publication date: 17 May 2022

Aswini Kumar Mishra, Saksham Agrawal and Jash Ashish Patwa

The study uses the multivariate GARCH-BEKK model (which was first proposed by Baba et al. (1990) and then further developed by Engle and Kroner (1995)) to examine the return and…

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Abstract

Purpose

The study uses the multivariate GARCH-BEKK model (which was first proposed by Baba et al. (1990) and then further developed by Engle and Kroner (1995)) to examine the return and volatility spillover between India and four leading Asian (namely, China, Japan, Singapore and Hong Kong) and two global (namely, the United Kingdom and the United States) equity markets.

Design/methodology/approach

The study employs a multivariate GARCH-BEKK model to quantify return correlation and volatility transmission across the pre- and post-2008 global financial crisis periods (apart from other conventional time series modelling like cointegration, Granger causality using vector error correction model (VECM)).

Findings

The results show a tendency of the Indian stock market index to move along with the US and Hong Kong market indices. The decrease in the value of the co-integration coefficient during the recession was explained by reduced investor confidence in developing countries. The result further shows a clear distinction in terms of volatility spillover between the Asian market vis-a-vis US and UK markets. Volatility transmission from India to Asian markets was found to be significantly higher as compared to the US and UK. So also, the study’s results show a puzzling result giving us comparable co-integration ranks for phase 2 (expansion) and phase 3 (slow-down) of the business cycle in most cases.

Research limitations/implications

In Granger causality testing, the results were unable to ascertain the difference between phase 2 (expansion) and phase 3 (slowdown). However, the multivariate GARCH (MGARCH)-BEKK model showed a clear reduction in volatility transmission to NIFTY50 (is the flagship index on the National Stock Exchange of India Ltd. (NSE)) as India entered slow-down. This shows that the Indian economy does go through different business cycles, and the changes in parameters hence prove hypothesis 3 to be true with respect to volatility transmission to India from International markets.

Originality/value

The results show that for all countries, the volatility transmitted to India increases significantly going from phase 1 (recession) to phase 2 (expansion) and reduces again once the countries enter slow-down in phase 3 (slowdown). This shows that during expansion shocks and impulses in international markets affect the Indian markets significantly, supporting the increase in co-integration in phase 2 (expansion). During expansion, developing markets like India become profitable for investors, due to the high growth rate when compared to developed countries. This implies that a significant amount of capital enters Indian markets, which is susceptible to the volatility of international markets. The volatility transmission from India to the US and UK was insignificant in phase 1 (recession and recovery) and phase 3 (slow-down) showing a weak linkage between the markets during volatile time periods.

Details

Journal of Economics, Finance and Administrative Science, vol. 27 no. 54
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 16 March 2021

Bayu Adi Nugroho

It is crucial to find a better portfolio optimization strategy, considering the cryptocurrencies' asymmetric volatilities. Hence, this research aimed to present dynamic…

1643

Abstract

Purpose

It is crucial to find a better portfolio optimization strategy, considering the cryptocurrencies' asymmetric volatilities. Hence, this research aimed to present dynamic optimization on minimum variance (MVP), equal risk contribution (ERC) and most diversified portfolio (MDP).

Design/methodology/approach

This study applied dynamic covariances from multivariate GARCH(1,1) with Student’s-t-distribution. This research also constructed static optimization from the conventional MVP, ERC and MDP as comparison. Moreover, the optimization involved transaction cost and out-of-sample analysis from the rolling windows method. The sample consisted of ten significant cryptocurrencies.

Findings

Dynamic optimization enhanced risk-adjusted return. Moreover, dynamic MDP and ERC could win the naïve strategy (1/N) under various estimation windows, and forecast lengths when the transaction cost ranging from 10 bps to 50 bps. The researcher also used another researcher's sample as a robustness test. Findings showed that dynamic optimization (MDP and ERC) outperformed the benchmark.

Practical implications

Sophisticated investors may use the dynamic ERC and MDP to optimize cryptocurrencies portfolio.

Originality/value

To the best of the author’s knowledge, this is the first paper that studies the dynamic optimization on MVP, ERC and MDP using DCC and ADCC-GARCH with multivariate-t-distribution and rolling windows method.

Details

Journal of Capital Markets Studies, vol. 5 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 18 June 2019

Anupam Dutta, Naji Jalkh, Elie Bouri and Probal Dutta

The purpose of this paper is to examine the impact of structural breaks on the conditional variance of carbon emission allowance prices.

1966

Abstract

Purpose

The purpose of this paper is to examine the impact of structural breaks on the conditional variance of carbon emission allowance prices.

Design/methodology/approach

The authors employ the symmetric GARCH model, and two asymmetric models, namely the exponential GARCH and the threshold GARCH.

Findings

The authors show that the forecast performance of GARCH models improves after accounting for potential structural changes. Importantly, we observe a significant drop in the volatility persistence of emission prices. In addition, the effects of positive and negative shocks on carbon market volatility increase when breaks are taken into account. Overall, the findings reveal that when structural breaks are ignored in the emission price risk, the volatility persistence is overestimated and the news impact is underestimated.

Originality/value

The authors are the first to examine how the conditional variance of carbon emission allowance prices reacts to structural breaks.

Details

International Journal of Managerial Finance, vol. 16 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Open Access
Article
Publication date: 23 January 2023

Hanan Mahmoud Sayed Agbo

This study focuses on forecasting the price of the most important export crops of vegetables and fruits in Egypt from 2016 to 2030.

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Abstract

Purpose

This study focuses on forecasting the price of the most important export crops of vegetables and fruits in Egypt from 2016 to 2030.

Design/methodology/approach

The study applied generalized autoregressive conditional heteroskedasticity (GARCH) model and autoregressive integrated moving average (ARIMA) model.

Findings

The results show that ARIMA (1,1,1), ARIMA (2.1,2), ARIMA (1,1,0), ARIMA (1,1,2), ARIMA (0,1,0) and ARIMA (1,1,1) are the most appropriate fitted models to evaluate the volatility of price of green beans, tomatoes, onions, oranges, grapes and strawberries, respectively. The results also revealed the presence of ARCH effect only in the case of Potatoes, hence it is suggested that the GARCH approach be used instead. The GARCH (1,1) is found to be a better model in forecasting price of potatoes.

Originality/value

The study of food price volatility in developing countries is essential, since a significant share of household budgets is spent on food in these economies, so forecasting agricultural prices is a substantial requirement for drawing up many economic plans in the fields of agricultural production, consumption, marketing and trade.

Details

Review of Economics and Political Science, vol. 8 no. 2
Type: Research Article
ISSN: 2356-9980

Keywords

Open Access
Article
Publication date: 8 August 2023

Mohd Ziaur Rehman and Karimullah Karimullah

The current study aims to examine the impact of two black swan events on the performance of six stock markets in Gulf Cooperation Council (GCC) economies (Abu Dhabi, Bahrain…

Abstract

Purpose

The current study aims to examine the impact of two black swan events on the performance of six stock markets in Gulf Cooperation Council (GCC) economies (Abu Dhabi, Bahrain, Dubai, Oman, Qatar and Saudi Arabia). The two selected black swan events are the US Mortgage and credit crisis (Global Financial Crisis of 2008) and the COVID-19 pandemic.

Design/methodology/approach

The performance of all the six stock markets are represented by their return and price volatility behavior, which has been measured by applying ARCH/GARCH model. The comparative analysis is done by employing mean difference models. The data is collected from Bloomberg on a daily frequency.

Findings

The response of two black swan events on the GCC stock markets has been heterogenous in nature. During the financial crisis, the impact was heavily felt on most of the stock markets in the GCC countries. It is revealed that the financial crisis had a negative significant impact on four of the six countries. Whereas during the COVID-19 crisis, it is revealed that there is no significant impact on four of the six selected stock markets. The positive significant impact is felt on two stock markets, namely, the Abu Dhabi stock market and the Saudi stock market.

Originality/value

The present investigation attempts to fill the gap in the literature on the intended topic because it is evident from the literature on the chosen subject that no study has been undertaken to evaluate and contrast the impact of the GFC crisis and COVID-19 on the GCC stock markets.

Details

Arab Gulf Journal of Scientific Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-9899

Keywords

Open Access
Article
Publication date: 9 January 2024

Yadong Liu, Nathee Naktnasukanjn, Anukul Tamprasirt and Tanarat Rattanadamrongaksorn

Bitcoin (BTC) is significantly correlated with global financial assets such as crude oil, gold and the US dollar. BTC and global financial assets have become more closely related…

Abstract

Purpose

Bitcoin (BTC) is significantly correlated with global financial assets such as crude oil, gold and the US dollar. BTC and global financial assets have become more closely related, particularly since the outbreak of the COVID-19 pandemic. The purpose of this paper is to formulate BTC investment decisions with the aid of global financial assets.

Design/methodology/approach

This study suggests a more accurate prediction model for BTC trading by combining the dynamic conditional correlation generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model with the artificial neural network (ANN). The DCC-GARCH model offers significant input information, including dynamic correlation and volatility, to the ANN. To analyze the data effectively, the study divides it into two periods: before and during the COVID-19 outbreak. Each period is then further divided into a training set and a prediction set.

Findings

The empirical results show that BTC and gold have the highest positive correlation compared with crude oil and the USD, while BTC and the USD have a dynamic and negative correlation. More importantly, the ANN-DCC-GARCH model had a cumulative return of 318% before the outbreak of the COVID-19 pandemic and can decrease loss by 50% during the COVID-19 pandemic. Moreover, the risk-averse can turn a loss into a profit of about 20% in 2022.

Originality/value

The empirical analysis provides technical support and decision-making reference for investors and financial institutions to make investment decisions on BTC.

Details

Asian Journal of Economics and Banking, vol. 8 no. 1
Type: Research Article
ISSN: 2615-9821

Keywords

Open Access
Article
Publication date: 12 June 2017

Nara Rossetti, Marcelo Seido Nagano and Jorge Luis Faria Meirelles

This paper aims to analyse the volatility of the fixed income market from 11 countries (Brazil, Russia, India, China, South Africa, Argentina, Chile, Mexico, USA, Germany and…

1950

Abstract

Purpose

This paper aims to analyse the volatility of the fixed income market from 11 countries (Brazil, Russia, India, China, South Africa, Argentina, Chile, Mexico, USA, Germany and Japan) from January 2000 to December 2011 by examining the interbank interest rates from each market.

Design/methodology/approach

To the volatility of interest rates returns, the study used models of auto-regressive conditional heteroscedasticity, autoregressive conditional heteroscedasticity (ARCH), generalized autoregressive conditional heteroscedasticity (GARCH), exponential generalized autoregressive conditional heteroscedasticity (EGARCH), threshold generalized autoregressive conditional heteroscedasticity (TGARCH) and periodic generalized autoregressive conditional heteroscedasticity (PGARCH), and a combination of these with autoregressive integrated moving average (ARIMA) models, checking which of these processes were more efficient in capturing volatility of interest rates of each of the sample countries.

Findings

The results suggest that for most markets, studied volatility is best modelled by asymmetric GARCH processes – in this case the EGARCH – demonstrating that bad news leads to a higher increase in the volatility of these markets than good news. In addition, the causes of increased volatility seem to be more associated with events occurring internally in each country, as changes in macroeconomic policies, than the overall external events.

Originality/value

It is expected that this study has contributed to a better understanding of the volatility of interest rates and the main factors affecting this market.

Propósito

Este estudio analiza la volatilidad del mercado de renta fija de once países (Brasil, Rusia, India, China, Sudáfrica, Argentina, Chile, México, Estados Unidos, Alemania y Japón) de enero de 2000 a diciembre de 2011, mediante el examen de las tasas de interés interbancarias de cada mercado.

Diseño/metodología/enfoque

Para la volatilidad de los retornos de las tasas de interés, se utilizaron modelos de heteroscedasticidad condicional autorregresiva: ARCH, GARCH, EGARCH, TGARCH y PGARCH, y una combinación de estos con modelos ARIMA, comprobando cuáles de los procesos eran más eficientes para capturar la volatilidad de interés de cada uno de los países de la muestra.

Hallazgos

Los resultados sugieren que para la mayoría de los mercados estudiados la volatilidad es mejor modelada por procesos GARCH asimétricos —en este caso el EGARCH— demostrando que las malas noticias conducen a un mayor incremento en la volatilidad de estos mercados que las buenas noticias. Además, las causas de una mayor volatilidad parecen estar más asociadas a eventos que ocurren internamente en cada país, como cambios en las políticas macroeconómicas, que los eventos externos generales.

Originalidad/valor

Se espera que este estudio contribuya a un mejor entendimiento de la volatilidad de las tasas de interés y de los principales factores que afectan a este mercado.

Palabras clave

Ingreso fijo, Volatilidad, Países emergentes, Modelos ARCH-GARCH

Tipo de artículo

Artículo de investigación

Details

Journal of Economics, Finance and Administrative Science, vol. 22 no. 42
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 25 September 2023

Wassim Ben Ayed and Rim Ben Hassen

This research aims to evaluate the accuracy of several Value-at-Risk (VaR) approaches for determining the Minimum Capital Requirement (MCR) for Islamic stock markets during the…

Abstract

Purpose

This research aims to evaluate the accuracy of several Value-at-Risk (VaR) approaches for determining the Minimum Capital Requirement (MCR) for Islamic stock markets during the pandemic health crisis.

Design/methodology/approach

This research evaluates the performance of numerous VaR models for computing the MCR for market risk in compliance with the Basel II and Basel II.5 guidelines for ten Islamic indices. Five models were applied—namely the RiskMetrics, Generalized Autoregressive Conditional Heteroskedasticity, denoted (GARCH), fractional integrated GARCH, denoted (FIGARCH), and SPLINE-GARCH approaches—under three innovations (normal (N), Student (St) and skewed-Student (Sk-t) and the extreme value theory (EVT).

Findings

The main findings of this empirical study reveal that (1) extreme value theory performs better for most indices during the market crisis and (2) VaR models under a normal distribution provide quite poor performance than models with fat-tailed innovations in terms of risk estimation.

Research limitations/implications

Since the world is now undergoing the third wave of the COVID-19 pandemic, this study will not be able to assess performance of VaR models during the fourth wave of COVID-19.

Practical implications

The results suggest that the Islamic Financial Services Board (IFSB) should enhance market discipline mechanisms, while central banks and national authorities should harmonize their regulatory frameworks in line with Basel/IFSB reform agenda.

Originality/value

Previous studies focused on evaluating market risk models using non-Islamic indexes. However, this research uses the Islamic indexes to analyze the VaR forecasting models. Besides, they tested the accuracy of VaR models based on traditional GARCH models, whereas the authors introduce the Spline GARCH developed by Engle and Rangel (2008). Finally, most studies have focus on the period of 2007–2008 financial crisis, while the authors investigate the issue of market risk quantification for several Islamic market equity during the sanitary crisis of COVID-19.

Details

PSU Research Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2399-1747

Keywords

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