Understanding the dependence relationships among cryptocurrencies and equity markets is of interest to both academics and researchers. This... Show moreUnderstanding the dependence relationships among cryptocurrencies and equity markets is of interest to both academics and researchers. This dissertation is comprised of two essays to add to this understanding. In the first essay, I investigate the interdependencies among the level of informational efficiency of four cryptocurrencies. I examine the correlations between the market efficiencies of cryptocurrencies using the rolling window method. I find that the correlations between those levels of market efficiencies are time-varying and influenced by the market condition and external events. I extend the study by employing Granger causality tests to analyze the causal relationships among these levels of market efficiency. I find that the Granger causalities among the levels of the cryptocurrency market efficiencies are time-varying and impacted by the level of the market efficiencies.
In the second essay, I investigate the pairwise dependencies and causalities between the returns of the cryptocurrencies and six equity market indices. I examine the pairwise dependencies between the returns of cryptocurrencies and those of the equity indices by using the DCC-GARCH framework. I find the dynamic conditional correlations between the cryptocurrencies and equity indices are time-varying and generally weak. Furthermore, I study the causal relationship between cryptocurrencies and equity indices by employing the rolling Granger causality test. I find that the Granger causalities between cryptocurrencies and equity indices are time-varying, and more unidirectional Granger causalities are found from cryptocurrencies to equity indices. In addition, I examine the impact of cryptocurrency returns on the correlations between the equity market indices, and likewise, the impact of equity market returns on the correlations between the cryptocurrencies. I find that the cryptocurrency price fluctuations have minimal impact on the correlations between equity indices. Moreover, the dynamic conditional correlation between cryptocurrencies is unaffected by equity price innovations except for some extreme events.
These findings could have implications for understanding the relationships among cryptocurrencies and equity markets and for investors wishing to incorporate these relationships in their portfolio choices. Show less