Impact of crypto currencies on performance of stock returns: Evidence from BRICS countries

Abstract

The interlink-ages between crypto currencies and stock indices in a panel of BRICS economies are empirically examined in this study. The panel of econometric techniques namely Levin, Lin and Chu (LLC) panel unit root test, Johansen Fisher, Pedroni, and Kao Panel cointegration, Dumitrescu and Hurlin panel granger causality, the fixed effects model and IV-GMM models are applied for empirical investigation. For analysis, both daily and quarterly panel data of BRICS stock indices namely BOVESPA Index (Brazil), MOEX Index (Russia), NIFTY 50 Index (India), SSE Composite Index (China), and FTSE Index (South Africa), as well as the Bitcoin (BTC), Ethereum (ETH), Binance (BNB) and macro-economic variables are all obtained through world bank and investing.com from December 2017 to December2023. The result of fixed effects and IVGMM models suggests that the performance of stock indices in BRICS countries negatively impacted by crypto currencies, inflation and oil prices, whereas, real GDP has positively impacted the stock indices in these five economies. Panel Causality test result confirms a short run relationship exists between crypto currencies and stock indexes. The findings also indicated that a long-run equilibrium relationship do not exhibit between crypto currencies and BRICS stock indices. Based on our findings, suitable policy is recommended to regulate the crypto currency market.

Keywords

• crypto currencies
• stock indices
• panel granger causality test
• panel cointegration test