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

Roman Matkovskyy (1) , Akanksha Jalan (1)

1 ESC [Rennes] - ESC Rennes School of Business

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.

Mots clés: Financial markets; Bitcoin; Contagion; Regime switching skew-normal model (RSSN)

Domaines: Économie et finance quantitative [q-fin]; Finance [q-fin.GN]

Roman Matkovskyy, Akanksha Jalan. From financial markets to Bitcoin markets: A fresh look at the contagion effect. Finance Research Letters, 2019, 31, pp.93-97. ⟨10.1016/j.frl.2019.04.007⟩. ⟨hal-02131637⟩