From financial markets to Bitcoin markets: A fresh look at the contagion effect
Roman Matkovskyy, Akanksha Jalan · Finance research letters · 2019
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.