Management Review ›› 2021, Vol. 33 ›› Issue (11): 286-297.

• Fintech and Blockchain • Previous Articles    

The Relationship between Bitcoin and Chinese Financial Markets During COVID-19

Li Jiahong1,2, Li Ping1,2   

  1. 1. School of Economics and Management, Beihang University, Beijing 100191;
    2. Key Laboratory of Complex System Analysis, Management and Decision(Beihang University), Ministry of Education, Beijing 100191
  • Received:2020-09-08 Published:2022-01-12

Abstract: The outbreak of COVID-19 brought a crisis to the global financial market. Due to the arising attention on Bitcoin and the continuous development of Chinese market, the connections between the Bitcoin market and main assets of Chinese financial market are getting closer, and the risk transmission effect between the two markets is also expanding. Therefore, this paper investigates the interaction between the two markets to understand the mechanism of risk. We first use three GARCH family models containing dummy variables related to the epidemic to study whether there are leverage effects between the Bitcoin and main assets of Chinese financial markets. Results show that the GJR-GARCH-t model fits the best meaning that there is leverage effect between them. Then we study the risk relationship between the two markets by calculating VaR, CVaR and utilizing the information shock curve. Empirical results show that the VaR and CVaR calculated based on Cornish-Fisher expansion have a more reasonable estimation of Bitcoin risk. Furthermore, the risk of Bitcoin market increased sharply during the crisis, and the volatility of Bitcoin price was much more sensitive to bad news than to good news. So, it's necessary to allocate assets reasonably to avoid risk.

Key words: COVID-19, bitcoin, Chinese financial market, GJR-GARCH Model, risk