The Effect of COVID-19 on Cryptocurrencies and the Stock Market Volatility: A Two-Stage DCC-EGARCH Model Analysis

This research examines the correlations between return volatility of cryptocurrencies, global stock market indices, and spillover effects COVID-19 pandemic. For this purpose, we employed a two-stage multivariate exponential GARCH (EGARCH) model with an integrated dynamic conditional correlation (DCC) approach to measure impact on financial portfolio returns from 2019 2020. Moreover, used value-at-risk (VaR) measurements based Cornish–Fisher expansion (CFVaR). The empirical results show significant long- short-term effects. EGARCH model’s that volatilities both asset portfolios surge more after positive news respond well previous shocks. As result, assets have low unconditional lowest risk when there are no external interruptions. Despite assets’ sensitivity shocks, they exhibit some resistance fluctuations in confidence. VaR performance comparison differ. During outbreak, Dow (DJI) index reports VaR’s highest loss, followed by S&P500. Conversely, CFVaR negative for entire cryptocurrency during pandemic, except Ethereum (ETH).