Liquidity Connectedness of Cryptocurrencies and Stock Markets during COVID-19: A Wavelet Coherence Approach

25 Pages Posted: 21 Mar 2021

See all articles by Muhammad Umar

Muhammad Umar

School of Economics and Management, East China Jiaotong University

Ghulame Rubbaniy

Zayed University - College of Business

Yan XU

East China Jiaotong University

Date Written: March 15, 2021

Abstract

Using wavelet coherence framework on five major cryptocurrencies and three major stock market indices over the COVID-19 period from January 1st, 2020 to February 8th, 2021, our study concludes that SSEC index liquidity co-moves with liquidity of all the cryptocurrencies, while liquidities of Nikkei 225 and NYSE indices very weakly or not at all co-move with the sampled cryptocurrencies over most of our sample period. Our findings show that SSEC index liquidity positively co-moves with liquidities of all sampled crypto currencies over a limited time span and generally at short-term frequency band of 0-8 days; however, Ripple liquidity positively co-moves with liquidity of SSEC index at both shorter-horizon and long-term. Overall, our study provides useful insights that the choice of the crypto currency can play a significant role in portfolio liquidity diversification for investors investing in Nikkei 225 or NYSE index.

Keywords: Cryptocurrency, liquidity, stock market, wavelet coherence

JEL Classification: C58, G15

Suggested Citation

Umar, Muhammad and Rubbaniy, Ghulame and XU, Yan, Liquidity Connectedness of Cryptocurrencies and Stock Markets during COVID-19: A Wavelet Coherence Approach (March 15, 2021). Available at SSRN: https://ssrn.com/abstract=3805920 or http://dx.doi.org/10.2139/ssrn.3805920

Muhammad Umar

School of Economics and Management, East China Jiaotong University ( email )

Chengbei Development District
Nanchang, Jiangxi 330013
China
+8615970457020, +923354506802 (Phone)
330013 (Fax)

Ghulame Rubbaniy (Contact Author)

Zayed University - College of Business ( email )

Zayed University
P.O. Box 144534
Abu Dhabi
United Arab Emirates

Yan XU

East China Jiaotong University ( email )

Nanchang
Jiangxi
China

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