Interconnected Markets: Exploring the Dynamic Relationship Between BRICS Stock Markets and Cryptocurrency

ArXiv ID: 2406.07641 “View on arXiv”

Authors: Unknown

Abstract

This study aims to examine the intricate dynamics between BRICS traditional stock assets and the evolving landscape of cryptocurrencies. Using a time-varying parameter vector autoregression model (TVP-VAR), we have analyzed data from the BRICS stock market index, cryptocurrencies, and indicators from January 6, 2015, to June 29, 2023. The results show that three out of the five BRICS stock markets serve as primary sources of shocks that subsequently affect the financial network. The transcontinental (TCI) value derived from the dynamic conditional connectedness using the TVP-VAR model demonstrates a higher explanatory power than the static connectedness observed using the standard VAR model. The discoveries from this study offer valuable insights for corporations, investors, and regulators concerning systematic risk and investment strategies.

Keywords: Time-Varying Parameter VAR (TVP-VAR), Dynamic Connectedness, Cryptocurrencies, Systemic Risk, BRICS Markets, Equities

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Holy Grail
  • Why: The paper utilizes a sophisticated time-varying parameter vector autoregression (TVP-VAR) model, a non-linear econometric method that requires advanced statistical knowledge to implement and interpret. It demonstrates empirical rigor through a specific multi-year dataset, pre/post-COVID period analysis, and reporting of metrics like the transcontinental index (TCI) to compare model explanatory power.
  flowchart TD
    A["Research Goal<br>Analyze BRICS-Crypto Dynamics"] --> B["Data Collection<br>Jan 2015 - Jun 2023"]
    B --> C["Methodology<br>Time-Varying Parameter VAR"]
    C --> D["Computational Process<br>Dynamic Connectedness Analysis"]
    D --> E{"Key Findings & Outcomes"}
    E --> F["TCI > Static VAR<br>Time-Varying explains variance better"]
    E --> G["3/5 BRICS Markets<br>Primary shock transmitters"]
    E --> H["Risk Implications<br>Investment & Regulation Strategies"]