Dynamic Cross-Market Volatility Spillover Based on MSV Model: Evidence from Bitcoin, Gold, Crude Oil, and Stock Markets

Abstract

This paper examines the spillover effect between bitcoin, gold, crude oil, and major stock markets by using the MSV model with dynamic correlation and Granger causality. The empirical results of the DC-GC-MSV model are logically correct and convergent. The DIC test result has proved that the DC-GC-MSV model is better and more accurate. Bitcoin has no significant Granger causality spillover effect than other assets. As a safe haven product for stock assets, gold price has one-way spillover effect from stock market volatility. Moreover, crude oil has the highest correlation with the stock market. In the recent COVID-19 epidemic and the sluggish economic environment, investors need to consider a balanced asset allocation among low-correlation assets, medium-correlation assets, and high-correlation assets to reduce risks.