VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS FACULITY OF FINANCE AND BANKING EXAMINING THE CO-MOVEMENT BETWEEN CRYPOCURRENCY MARKET AND MAJOR STOCK MARKETS IN THE WORLD LECTURER: PhD LE HONG THAI STUDENT: NGUYEN THI THU HIEN CLASS: QH-2019E TCNH CLC 2 TYPE OF TRAINING: HIGH QUALITY ACKNOWLEDGMENTS During the time of researching and implementing this research, I have received very enthusiastic help, valuable words of encouragement. With all respect and gratitude, I would like to express our sincere thanks to: The Board of Directors of the University of Economics and Business - Vietnam National University has built a learning environment that helps meas well as the students of the whole university to be motivated, opportunities to access and practice scientific research. I sincerely thank the teachers and experts of the Faculty of Finance and Banking and other faculties in the university for taking the time to answer and analyze the questions, contributing to creating a foundation to help me confidently implement this research. I would like to express my deep gratitude to PhD.
Le Hong Thai - the person who directly guided me. He is a very dedicated and enthusiastic teacher with new directions, detailed communication, frank suggestions and especially he is always conscious to show me that the greatest value I receive after completing This research that Iam understanding the importance of risk management in banks. I feel very fortunate to receive his support. For the first time conducting research, | still have many limitations and can't be blamed for mistakes.
I look forward to receiving comments from teachers and readers to improve the research. Hanoi, May 10,2023 LECTURER STUDENT LE HONG THAI NGUYEN THI THU HIEN CONTENTS Chapter 1: IntroduCtÏOI. The relevance of the research topic. Research 0obj€@CÏV€S.-- -- Án HH HH TH TH HH TH HH HH 10 1.
Object and scope of the researrCH. -- -- c1 11v SH TH TH HH ng re 11 1. Expected research Contributions .-- -- c1 HH TH no HH nh 11 1.-- - G1 HH nọ TT tre 12 (0210)i24928D\122v-11)14-8. - - - -- 1n nh TH TH TT TH HH HT HH HH 13 2.
Factors affecting the price of financial assets and the price ofa stock. Current status of virtual currencies in some countries around the world. HH HH Ho Ho. TT Họ Tp 34 2.4, RES@arch Sap ỪỪ:.
- G1111 HT HH Họ TT vn 37 Chapter 3: Research Methodology .- - - - - co HH te 38 3. - - -- <1 11H TH HH Họ nọ tk 38 3.- LH TH TH TH Họ HT TT tr 39 Chapter 4: Research results .- -- - - - G1111 119 v1 SH SH nọ HH net 41 4. Empirical research results.-- --- 6 + 1E k* TH TT TH HH 49 4. The comovement between the prices of cryptocurrencies and the world stock market ¡6 07077 ----:1.The comovement between the trading volume of cryptocurrencies and the world stock Market ÏT€X.- Ghi HH Hi hi 53 Chapter 5: COmclusion 0886866.
Summary of research results. -- - 2 <1 1E HH HH HH tk 58 5. Future TESEALCH CiIrectiONs SN HƯHŸỮẢ. REFERENCES LIST OF ACRONYMS "mm m.=_— CAPM Capital asset pricing model CFTC Commodity Futures Trading Commission ETH Ethereum GARCH Generalize Auto Regressive Conditionally Hestoroscedastic ¬© GCS Statista Global Consumer Survey ¬N IRS Internal Revenue Service Financial Conduct Authority LIST OF TABLES Table 4.
su cà HH San Km HH nêm Xin HH KH TH XE HH HH Hy ens 45 Table 4.47 LIST OF FIGURES Figure 1.1: Overall cryptocurrency market capitalization per week from Apr 29, 2013 to May 3, 202. con nọ HH ng HH" ng HH TH KH Ha Tạ Ha SE ĐIP SE TY BH TY II SE aus TY HH cause SE ĐI HH azarae min nhan C Figure 1.2: Cryptocurrency adoption in different countries worldwide April 2023.1: Selloff global funds have rushed to sell Asian EM stocks in recent week.2: Some examples Of CFYDtfOCUTT€TICÏ€S.--- cee 5< s7 se se sex se sex se ceee 2 Figure 4.1: Change of price Bitcoin, Ethereum, LĨt€COÏT.- «5< << ni sesriseesreseseseseee Figure 4.3: Change Of MSCI-WOTÌ. «5< s« ề< + SY BS sinh xen si re như se nha na“ CỔ Figure 4.4: The wavelet coherence between the price returns of BTC and MSCI- WOTÌ. eee eae ena cece see XS.
cae HH ky Kim xe my sae neces gee KH cas si my xe nhà xe SH in xi nhà xen ni si mn nên chan “E Figure 4.5: The correlation between ETH and MSCI-World.6: The correlation between LTC and MSCI-WOFI.7: The correlation between volume BTC and MSCI-WOorld.8: The correlation volume ETH and MSCI-WOrld.9: The correlation between volume LTC and MSCI-World. The relevance of the research topic Currently, along with the development of the Internet and technology in the financial sector, banks have been able to access and use the most advanced technologies in the financial sector, especially payment systems without using cash. With an Internet banking system, applications running on iOS or Android platforms, users can easily use online transactions. Online payment services that use cryptocurrencies to transact in cryptocurrencies are becoming more and more popular.
Recently, however, the market capitalization of cryptocurrency has been on a downward trend (Figure 1. It is estimated that the cumulative market capitalization of cryptocurrencies has declined significantly from May 2021 up to the present, as cryptocurrencies are less likely to become an investment instrument. The reason is attributed to China's efforts to prevent cryptocurrency mining and expansion in the country.1: Overall cryptocurrency market capitalization per week from Apr 29, 2013 to May 3, 2023. $4,000,000,000,000 $3,000,000,000,000 $2,000,000,000,000 $1,000,000,000,000 2014 2018 2022 Source: Statista Global Consumer Survey (GCS) As of 2023, it is estimated that the global crypto ownership will be at an average of 4.2% with 420 million crypto users worldwide.
Especially in Vietnam - a developing country compared to those that have a very high percentage of possession of cryptocurrencies, accounting for 20.54% compared to developed countries such as the United States, Japan, the United Kingdom, and the (Figure 1. We find that the leading developing countries in this market are the ones that are looking for investment and development opportunities. L m Nigeria = Thailand Philippines = Vietnam = Turkey = United Kingdom # Japan = United States Source: Statista Global Consumer Survey (GCS) Since the birth of Bitcoin in 2009, the electronic money market has experienced a rapid growth. Although it was once a niche and unofficially traded market in its early years, trading is now happening 24/7 on over 500 stock exchanges.
The current capitalization (as of April 2023) of the electronics market is around $1 trillion, possibly compared with the largest US tech stocks. In the 12 years of development, the characteristics of the cryptocurrency market have changed significantly. The properties of the payback time series of cryptocurrency prices are close to those observed in mature financial markets such as Forex. However, it has long been believed that the cryptocurrency market itself is strongly correlated especially during the COVID-19 period, having a dynamic that is separate from the traditional financial markets, and that Bitcoin may even play a role.
It acts as a hedge or a safe haven for the stock market, Forex, or the stock market. The hedging potential of Bitcoin has even been compared to that of gold. However, there are some recent studies that have changed this pattern. They suggest that the COVID-19 outbreak and related crash in March 2020 electronic markets and especially Bitcoin are highly correlated with stock market declines.
Some studies have even noted that the relationship persists during market recoveries. Against these backdrops, there still exists uncertainty about the interplay between cryptocurrencies and the stock market. This uncertainty opens up the space for further research on this topic and our research is precisely conducted in this direction of research. Following this vein, the thesis titled “EXAMINING THE CO-MOVEMENT BETWEEN CRYPTOCURRENCY MARKET AND MAJOR STOCK MARKETS IN THE WORLD?’ is proposed.
Research objectives We intend to determine how changes in cryptocurrency prices are related to price changes in the world stock markets (MSCI-world). To that end, the returns and trading volume of 3 cryptocurrencies, namely Bitcoin, Ethereum, and Litecoin as well as the price return of the world stock market index are studied based on daily data over the period from January 2020 to December 2022. Year 2022 is particularly interesting, because since the BTC price peaked in November 2021 there has been a general bear market for US tech stocks and the latter cryptocurrency for the first time. On the basis of this observation, it is likely that there will be some detectable correlation between the two markets.
2022 is also the only year in the history of cryptocurrency with high inflation in the world. Compared with other articles dealing with the correlation between electronic markets and financial markets, in this study the main task is to measure these correlations quantitatively on different time scales and for fluctuations at different scales. Specifically, the study was carried out with the following purposes: First, to detect the co-movement between the price returns as well as trading volume of 3 coins and the world stock market index using the wavelet analysis of Torrence and Comp (1998). 10 Second, to propose some solutions to the price of cryptocurrencies and stocks do not affect each other.
Research questions From the above research purposes, the study poses the following research questions: First, how is the co-movement between the price returns of cryptocurrencies and the price return of the world stock market? Second, how is the co-movement between trading volume of cryptocurrencies and price return of the world stock market? Third, what solutions can be proposed to avoid mutual influence between the cryptocurrency market and the stock market? 1. Object and scope of the research Research object: Price return and trading volume of Bitcoin, Ethereum, Litecoin and price return of the world stock market index (MSCI-World). Research scope: Research the price and trading volume movements of 3 coins (Bitcoin, Ethereum, Litecoin) and world stock market index from January 2020 to December 2022. Expected research contributions Applying the wavelet method to understand the companionship of the electronic market and the world's major stock market is a relatively new topic.
Especially, according to the author's research, there is hardly any topic on this topic. Therefore, this study will provide a theoretical basis on how to apply wavelet model to detect correlation between cryptocurrency and stock market. From there, as a premise for further studies on this topic and related topics. Through the process of transaction simulation, it will be possible to confirm the effect of applying wavelet model in the cryptocurrency market, If the 11 investment efficiency has been proven, the research results can be used by investors.
investment reference in the decision-making process. Research structure This study consists of five chapters. In chapter 1, we introduce the research topic, research objectives and research questions. Next, we present the theoretical basis as well as an overview of related research papers in chapter 2.
In chapter 3, we present the research methodology, data sources and how we process the data. Chapter 4 is the research results of the paper. Finally, chapter 5 includes our conclusions and recommendations on the research problem. 12 Chapter 2: Literature Review 2.
Factors affecting the price of financial assets and the price of a stock 2. Stock pricing model The dividend discount model means that the value of the stock equals the present value of the cash flows that shareholders expect to receive from holding the stock. The dividend discount model only discounts the stock's dividend streams for valuation: 012g (1+k)?