Causality between stock indices and cryptocurrencies before and during the Russo–Ukrainian war

• Published in: International review of economics 2024-06, Vol.71 (2), p.301-323
• Main Authors: Mgadmi, Nidhal, Sadraoui, Tarek, Abidi, Ameni
• Format: Article
• Language: English
• Subjects: Causality; Digital currencies; Diversification; Economic Policy; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Geopolitics; Hedging; History of Economic Thought/Methodology; International finance; Investments; Investors; Law and Economics; Quality of Life Research; Research Article; Securities markets; Social Policy; Stochastic models; Stock exchanges; Stock market indexes; Volatility; War
• ISSN: 1865-1704; 1863-4613
• DOI: 10.1007/s12232-023-00444-5

In this paper, we study the unidirectional interdependence between the stock indices of Japan, Canada, Germany, France, Russia, Ukraine, and the United States with the seven most popular cryptocurrencies: Bitcoin, Ethereum, Litecoin, Dash, Ripple, DigiByte, and XEM. We focus on two sub-periods: the first before the war in July 1, 2017 to September 31, 2019 and the second during the war in the start of the Russian invasion of Ukraine to December 16, 2023. We use the Granger causality test (Econom J Econom Soc 37:424–438, 1969) in levels to investigate the strong dependence between the seven stock indices and the seven cryptocurrencies. We find that the unidirectional dependence between these two asset classes disappears during the war due to high volatility, as evidenced by the GARCH and FGARCH models.