Time–frequency quantile dependence between Bitcoin and global equity markets |
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Institution: | 1. Poznan University of Economics and Business, Al. Niepodleglosci 10, 61-875, Poznan, Poland;2. Adam Mickiewicz University in Poznan, ul. Wieniawskiego 1, 61-712, Poznan, Poland;1. Department of Accounting and Finance, United Arab Emirates University, UAE;2. Department of Accounting and Finance, United Arab Emirates University, Al Ain, Abu Dhabi, UAE |
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Abstract: | In this paper, we examine return dependence between Bitcoin and stock market returns using a novel quantile cross-spectral dependence approach. The results suggest a right-tail (high return) dependence between Bitcoin and the stock markets in the long term and that said dependence decreases significantly from yearly to monthly investment horizons. Furthermore, right-tail dependence between Bitcoin and the US stock market is the strongest compared with other stock markets. We also extract information on the time-varying and time–frequency structure of co-movements between Bitcoin and the stock markets using wavelet-coherence analysis, the results of which suggest that the co-movement between Bitcoin and the US stock market is positive, whereas, for other stock markets, it is negative at certain frequencies and time periods. Overall, the findings highlight additional risk-management capabilities of Bitcoin according to different stock markets. |
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Keywords: | Bitcoin Quantile cross-spectral dependence Causality-in-quantiles Wavelet coherence Stock markets Diversification |
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