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Exploring the Dynamics of Equity and Cryptocurrency Markets: Fresh Evidence from the Russia–Ukraine War

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Abstract

This study investigates the dynamic connectedness between equity and cryptocurrency markets using the Granger Causality Network and the Wavelet Coherence approaches. Using time series data from July 2021 to January 2023, results indicate that the causality effect increased significantly after the outbreak of geopolitical conflict. Cryptocurrency markets are highly influenced and mutually more connected with equity markets after February 2022. Results also indicate that the causality is more important in European countries and steadily increased as the war progressed. Nevertheless, there is no distinct indication of contagion in China's market. Of greater interest, it is revealed that cryptocurrencies do not offer a "safe haven" advantage during the war, especially in North America and GCC countries. Cryptocurrency-equity markets are fully integrated and moved together for at least 5 months after the beginning of the war. Overall, this paper provides early insight into the use of cryptocurrencies by investors and reveals how equity and cryptocurrency markets co-move within countries. These results are further supported by an alternative Structural Vector Autoregression model. This study provides useful insights to investors, regulators, and policy-makers regarding portfolio management, hedging, and financial market stability.

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Abbreviations

DeFi:

Decentralized financial assets

NFT:

Non-fungible tokens

SCI:

Systemic contagion index

WCA:

Wavelet coherence analysis

GCC:

Gulf cooperation council

VIX:

Volatility index

ICO:

Initial coin offerings

WC:

Wavelet coherence

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Funding

This study was funded by Internal Research Support Programs (Program No. IRSPC2023002), Wenzhou-Kean University, China.

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Authors and Affiliations

  1. Higher Institute of Management of Gabès, Higher Institute of Management of Tunis GEF2A-Lab, Le Bardo 2000, Tunis, Tunisia

    Foued Hamouda

  2. College of Business and Public Management, Wenzhou-Kean University, Wenzhou, China

    Imran Yousaf

  3. Adnan Kassar School of Business, Lebanese American University, Beirut, Lebanon

    Imran Yousaf & Muhammad Abubakr Naeem

  4. Accounting Department, School of Business, The University of Jordan, Amman, Jordan

    Imran Yousaf

  5. College of Business and Economics, United Arab Emirates University, Al-Ain, United Arab Emirates

    Muhammad Abubakr Naeem

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  1. Foued Hamouda
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  2. Imran Yousaf
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Correspondence to Imran Yousaf.

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Hamouda, F., Yousaf, I. & Naeem, M.A. Exploring the Dynamics of Equity and Cryptocurrency Markets: Fresh Evidence from the Russia–Ukraine War. Comput Econ (2024). https://doi.org/10.1007/s10614-024-10573-w

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