Volatility and return spillovers between stock markets and cryptocurrencies

Abstract

This study verified the presence of returns and volatility spillovers across five major stock markets and the bitcoin market. A multivariate VARMA-AGARCH model was used to model the transmission mechanism of mean return, return spillovers and volatility spillovers between these market pairs. Significant return spillovers and volatility spillovers were observed across these market pairs. Volatility spillovers in some markets were bi-directional and in other markets, uni-directional. We thus conclude that at the peaks and troughs of a stock market, investors migrate between these market pairs to maximize returns and reduce exposure to risk, resulting in return and volatility spillovers between the market pairs.