Analysis of the Relationship Between Returns of Nasdaq Composite and Bitcoin

Abstract

Purpose: The article aims to investigate the relationship between the returns of the NASDAQ Composite stock index and the Bitcoin cryptocurrency. Theoretical framework: According to the literature, it is obvious that cryptocurrencies are very volatile, especially during the economic instability period. There is a belief that when uncertainty is in the economy, investors prefer alternative investment opportunities. There is a need to prove that. Design/Methodology/Approach: The study employs two different models, the ARMAX and the GARCH, to analyze the data from March 2018 to March 2023. The results of the analysis suggest a significant relationship between the returns of the NASDAQ Composite and Bitcoin. These results have important implications for investors and policymakers. Findings: The findings suggest that investors need to be aware of the potential risks and benefits associated with investing in both assets, particularly in times of economic uncertainty. Policymakers may also need to consider the impact of traditional stock markets and the overall economy on cryptocurrencies. Research, Practical & Social implications: The research suggests that investors should be careful with cryptocurrencies. Originality/Value: The results are based on the time series analysis that makes the research original. Because there are few examples of time series and volatility analysis of cryptocurrencies.