Cryptocurrency and Stock Market: Complements or Substitutes?

  • Mina Sami The American University in Cairo


Purpose/Relevance: The main goal of this study is to find whether the cryptocurrency market does significantly impact the stock market prices and returns. Conspicuously, understanding this impact is quite interesting to clarify whether cryptocurrency market and stock market are acting as substitute or complement markets for investors.


Design/Methodology: We compile stock market daily data obtained from the historical indices of the Gulf countries with cryptocurrency market dataset obtained from on a daily basis over the period 2014-2019. Properties of Panel Cointegration tests (Kao, Pedroni, Westerlund), Panel Causality tests as well as Generalized Method of Moments with Instrumental Variable (IV-GMM) have been implemented to fulfill the objective of the paper.


Findings: The results of this paper show  that the Stock market and cryptocurrency market are acting as substitutes in Gulf countries. Each 10 percent increase in the  cryptocurrency returns, the stock market returns in Gulf countries shrink 0.17 percent. Cryptocurrency market does significantly hamper the stock market indices in the Gulf countries.


Originality/Value: Having agreed upon in the literature that stock market is affected by fundamental factors, market sentiment, technical factors as well as anomalies, this study offers robust evidence that cryptocurrency should be introduced, nowadays, as one of the main determinants of stock market prices and returns.


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How to Cite
SamiM. (2020). Cryptocurrency and Stock Market: Complements or Substitutes?. Applied Finance Letters, 9, 25-35.
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