The impact of bitcoin volatility and bubbles on G20 equity markets: An analysis with the DCC-GARCH Model

The rapid advancement of technology and the increasing integration of financial markets have paved the way for price movements in different markets to be instantly reflected across one another. This phenomenon has transformed volatility interaction into a strategically significant indicator that must be monitored not only at the local level but also on a global scale. In this context, understanding the volatility relationship among financial markets is of critical importance, both for grasping the dynamics that influence investment decisions and for contributing to the preservation of stability in financial systems. Accordingly, the aim of this study is to examine the impact of volatility and bubbles in the Bitcoin market on the stock markets of G20 countries using the DCC-GARCH method. The findings reveal that bubbles in the Bitcoin market have a negative impact on the stock markets of Turkey, the United States, France, the United Kingdom, Italy, Japan, Canada, Russia, China, Indonesia, India, Mexico, Argentina, Australia, and Saudi Arabia. Conversely, the stock markets of Germany, Brazil, South Africa, and South Korea appear to be unaffected. Another key finding of the study pertains to volatility interactions. A bidirectional volatility spillover is identified between Bitcoin and the stock markets of Germany, France, the United Kingdom, Italy, Japan, Canada, Russia, China, Argentina, Australia, South Africa, South Korea, and Saudi Arabia. In addition, a unidirectional volatility transmission is observed from the Indonesian stock market to Bitcoin, and from Bitcoin to the stock markets of Turkey, the United States, Brazil, India, and Mexico.