Keywords
Cointegration
Cryptocurrency
GARCH
Ganger Causality
Sensex
Spill-Over effect
How to Cite
Abstract
In recent times, cryptocurrency has created a powerful place in the financial system. The crypto market is relatively new and innovative in comparison to the traditional financial markets. However, the escalation in the price of cryptocurrency is astonishing. The market of cryptocurrency is also famous of high levels of volatility. This risk might also affect the sentiments of investors investing in the stock market. Hence, it becomes imperative to understand if there is any connectedness between the markets. This study seeks to examine if there is volatility spillover from cryptocurrency market to the stock market, and vice versa. We work with two cryptocurrencies- Bitcoin and Ethereum, and the Sensex represents the performance of the Indian Stock Market. We conclude that markets are not cointegrated. Also, there is no causal relationship between the markets. We do not find volatility spillovers between cryptocurrency and stock market. Hence, investors can choose to invest in equity or crypto currencies based on their risk preferences, without the fear of risk in one market affecting the other.
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