THE LINK BETWEEN CRYPTOCURRENCIES AND REGIONAL EQUITY INDEX: EVIDENCE FROM TVP- SV-VAR ANALYSIS

This paper analyses the relationship between major cryptocurrencies (Bitcoin, Ethereum, and Tether) and selected regional equity markets of America, Asia, and Europe, while controlling for global financial factors including crude oil prices and the EUR/USD exchange rate. The primary objective is to identify and quantify the time‑varying spillover effects and assess whether regional stock markets significantly influence cryptocurrency price dynamics during the period 2018–2023. For this purpose, the study utilises the Time-Varying Parameter Vector Auto-Regression model with stochastic volatility (TVP-SV-VAR) introduced by Primiceri (2005) and extended by Nakajima (2011), which allows us to observe possible changes in the economic structure. The study finds that spillover effects are strongest in the short term and decline over longer horizons. Among regional markets, MSCI Asia exerts the strongest influence on Bitcoin and Tether, whereas MSCI Americas has the largest impact on Ethereum. Notably, in the three key observation time points of this study, the market reaction intensity of Bitcoin and Ethereum has always been consistent, with a more prominent response during the COVID-19 outbreak. Tether’s impulse response impact coefficients were generally lower, and its peak response occurred during COVID-19 vaccine distribution. The results also show that oil price shocks and exchange‑rate movements contribute to cryptocurrency volatility, but with diminishing effects over time. Overall, the findings suggest that regional equity conditions are relevant but not sufficient for portfolio decision‑making because cryptocurrency prices are also driven by macroeconomic, monetary, and behavioural factors not fully captured in the model. This derives valuable conclusions for portfolio managers, investors, and even government regulators.