Relationship between Bitcoin and Stock Market

The Relationship between Bitcoin and Stock Market By Jassim Ahmed AlJowder 201610308 Ali Jamsheer Fairooz 201420230 Ahmed Mohamed Qurban 201510106 Supervisor DR. Sayed Mohammed December,…

The
Relationship between Bitcoin and Stock Market

By

Jassim
Ahmed AlJowder

201610308

Ali
Jamsheer Fairooz

201420230

Ahmed
Mohamed Qurban

201510106

Supervisor

DR.
Sayed Mohammed

December,
2019Manama,
Kingdom of Bahrain

The
Relationship between Bitcoin and Stock Market

A
PROJECT IN PARTIAL FULFILMENT OF THE REQUIREMENTS

FOR THE
DEGREE OF BACHELOR OF BANKING AND FINANCE COLLEGE OF BUSINESS AND
FINANCE, AHLIA UNIVERSITY

MANAMA,
KINGDOM OF BAHRAI

The
project report has been submitted to Ahlia University as a
partial fulfilment for the degree of Bachelor of Banking and Finance

and
has been examined and approved by the examining committee:

1.
Supervisor

2.
Internal Examiner #1 ……………………..

3.
Internal Examiner #2 ………………………………

Date:
1/12/ 2019

“We
would like to express our deepest gratitude to my supervisor, for the
excellent guidance, caring, patience, and providing me with an
excellent atmosphere for doing research. We would never let this
opportunity go by without expressing our deepest gratitude for
everyone who taught us even a letter. Thanks for all our teachers,
advisors, and supervisors who put us along the right way. We praying
for all of us. All our gratitude is for our family members who
created a comfortable atmosphere full of love and tender.

Many
Thanks!

Approval
Page II

Acknowledgment III

Table
of contents IV

List
of figures VI

List
of tables VI

Abstract VII

Chapter
one: Introduction 1

1.1.
Introduction: 1

1.2.
Overview: 1

1.3.
Research problem Statement 4

1.4.
Research Gap 4

1.5.
Significance of the study 5

1.6.
Research Objective 5

1.7.
Research Question and Hypothesis 6

1.8.
Research Variables 6

1.9.
Research Organization 6

Chapter
Two: Literature Review 8

2.1
Introduction: 8

2.2.
The Impact of Bitcoin on Stock Markets 8

2.3.
Previous Studies: 10

2.4.
Summary 19

Chapter
Three: Research Design & Methods 20

3.1.
Introduction: 20

3.2.
Research Design 21

3.3.
Research Approach: 21

3.4
Time Horizon 23

3.5.
Data collection source 23

3.6.
Research Variables: 24

3.7.
Research conceptual Model 24

3.8.
Research Hypotheses 24

3.9.
Data analysis tools 25

3.10.
Summary: 25

Chapter
Four: Data Analysis & Findings 25

4.1.
Introduction: 26

4.2.
Descriptive statistics: 27

4.3.
Unit root test – Augmented Dickey Fuller 29

4.4.
Pearson’s correlation test 31

4.5.
Granger Causality test 32

4.6.
Findings Discussion 33

4.7.
Summary: 34

Chapter
Five: Summary and Conclusion 35

5.1.
Introduction: 35

5.1
Summary 35

5.3.
Conclusions: 36

5.4.
Recommendations: 37

5.5.
Research limitations: 37

References 38

Figure
1 Research Conceptual Model3.8. Research Hypotheses 24

Table
1 Descriptive statistics for Bitcoin prices and stock market
index 27

Table
2 Augmented Dickey-Fuller test statistic of bitcoin and Egypt stock
index at level 29

Table
3 Augmented Dickey-Fuller test statistic of bitcoin and Egypt stock
index at first difference 30

Table
4 Correlation test between daily bitcoin price and Egypt stock
market index 31

Table
5 Granger Causality Test between daily bitcoin price and Egypt
stock market index 32

This
study has been done to assess the relationship between stock market
index and bitcoin prices in Egypt starting
from 19/07/2010 to 30/10/2019.
The most significant motive behind this study is scarcity of studies
in this knowledge domain in English about Egypt. The researcher
decided to make the study take the quantitative direction. The data
was time series collected from Bloomberg from 19/07/2010
to 30/10/2019. The
descriptive statistics, Pearson’s Correlation, granger causality
test, Augmented Dicky Fuller tests were applied via Eviews version
10. The findings showed that bitcoin prices and stock market index
does not granger each other.

There
is an agreement that the opening chapter is specified for the
introducing the bases of the research. This is certainly and
conventionally includes the problem research, questions, objectives,
and hypotheses. Significance of the research is also mentioned. The
gap that is approached as well as the organization of the research
are all placed hereafter.

There
is an agreement that Bitcoin is the most popular of all the
cryptocurrencies that are handled in the digital currency market
since the introduction of cryptocurrencies as early as 2009. Too many
cryptocurrencies have been introduced ever since; nevertheless,
Bitcoin is certainly the most successful amongst all of these
cryptocurrencies. Bitcoin received due care from specialists and
media. This has been the major cause behind the massive increase in
the overall value of Bitcoin that reached twenty billions USD in the
first quarter of 2017. This has been a motive for many central
banks to investigate the validity of adopting of cryptocurrency as
well as blockchain technologies for retail and large-value payments.
Supporters of cryptocurrencies allege that making use of this
technology and blockchain does significantly affect the how the
future of development of payment and financial systems is expected to
look like.

The
common idea between people is that the Bitcoin is a new thing.
However, the Bitcoin has been there since 2009. Moreover, some
researchers believe that the technology that stands behind the
Bitcoin’s existence has roots going back further in history. They
also assure that the Bitcoin is the first established
crypto-currency. In fact, there were several previous attempts for
creating online currencies with ledgers secured by encryption. Bit
Gold and B-Money are considered the most well-known examples of these
formulated attempts, yet all these attempts have never been fully
developed,[ CITATION Jac11 l 2057 ].
The first attempt to formulate the Bitcoin was registered in August
2008, when the domain name Bitcoin.org was registered online.
However, in the same year and after two months
appeared the name ‘Satoshi Nakamoto’ which is closely associated
with the person or the group of people that released the original
Bitcoin white paper. ‘Satoshi Nakamoto’ whose real identity is
still a mystery until this time, posted a paper called Bitcoin: A
Peer to Peer Electronic Cash System to a mailing list discussion on
cryptography. Then, the original Bitcoin software was released for
the first time
in
the year 2009. It happened that on the third of Jan in 2009, the
first Bitcoin block was mined, it is also known as the ‘genesis
block’, and its number was Block ‘0’,[ CITATION Rei131 l 2057 ].

Since
the creation of the Bitcoin in the year 2009, it has been given a
great attention. The Bitcoin has gained a wide popularity and gradual
universal acceptance. However, many people feel confused regarding
what a Bitcoin really is. Thus, it is of great importance to present
a definition of such an important concept. The term ‘Bitcoin’ is
typically defined as, ‘a type of digital currency in which
encryption techniques are used to regulate the generation of units of
currency and verify the transfer of funds, operating independently of
a central bank’
[CITATION Placeholder3 l 1033 ]..
Bitcoin
is one of the first digital currencies to use peer-to-peer technology
to facilitate instant payments. The Bitcoins could be used for online
transactions between individuals,[ CITATION Bau15 l 2057 ].
Besides, the term, ‘Bitcoin Mining’ refers to ‘the process
through which Bitcoins are created and released to come into
circulation’. Many business researchers believe that miners create
and accumulate the Bitcoins in reward for services offered to the
Bitcoin network like providing the hardware basis for secure
transactions. They also argue that the Bitcoin has the
characteristics of money that include; portability, durability,
scarcity, recognisability and divisibility. They also think that the
Bitcoins are based on the properties of mathematics
rather than relying on trust in central authorities like fiat
currencies, or relying on physical properties like gold and silver.
However, the status of Bitcoin as a transactions tool, or an
alternative currency is still subject to continuous debate,[ CITATION Coi151 l 2057 ].

1.3.
Research problem Statement

There
is no doubt that recency of the present research topic constitutes
the major motive for the researcher to investigate the relationship
between the two research variables: Bitcoin and stock market index.
Consequently, the researcher can articulate the research problem
statement in the following question “Is there a relationship
between Bitcoin prices and stock market price?”

1.4.
Research Gap

It
is agreed that bitcoin is one of the most recent inventions in the
world of finance. The number of writings that cast light on bitcoin
alone or in relation with other financial variables are still
growing. There is a striking need for these numbers to grow more and
more to satisfy the knowledge requirements in this domain. Writings
about bitcoin and stock market index are scarce and a gap in the
literature does exist. More efforts are required to make up for this
scarcity. This research is expected to be a contribution that adds to
the library of Ahlia University in this knowledge domain.

1.5.
Significance of the study

One
thing that makes the current the research a significant one is that
it provides a new evidence for the correlation between bitcoin and
stock market price in spite of the fact that bitcoin is not traded in
the stock markets. Another thing that creates the significance of
this research is that it casts light on the value of bitcoin in
financial markets and good it has been improving. This is can be a
good sign for people to start investing in bitcoin. Moreover, the
current research is significant for students in Ahlia University who
have intentions to carry out future research about bitcoin in
relation with other financial variables. The results of the research
can be significant for them.

1.6.
Research Objective

The
following objective is to be achieved through the present research

To
find out if a causal relationship exists between Bitcoin and stock
market index in Egypt.

1.7.
Research Question and Hypothesis

The
Research Question is :

Is
there a causal relationship between Bitcoin prices and stock market
in Egypt?

The
Research Hypotheses of this research is:

H0:
There
is no causal relationship between Bitcoin prices and stock market in
Egypt.

H1:
There is a causal relationship between Bitcoin prices and stock
market in Egypt.

1.8.
Research Variables

The
two variables used in the study are Bitcoin
prices and stock market in Egypt.

The
current research project is made up of five chapters. The opening
chapter is specified for the “Introduction & Significance”
of the research where the problem, questions, objectives, and
hypotheses are stated. The second chapter is specified for the
presentation of the relates “Literature” where the researcher
reviews and summarizes the most relevant article about bitcoin and
stock market. The third chapter focuses on the applied methodologies,
instruments and data analyses tools. The
fourth chapter casts light on the processes of “data analysis &
findings” where the research questions are answered and the
hypotheses are tested. In the final and fifth chapter the researchers
provide the readers with their” Conclusions and recommendations”
on the investigated topic.

Bitcoin is a promising virtual
currency, and it has attracted an increasing research interest that
comes from both the economic world and the secure computer-networking
world. In addition, several mainstream financial media and financial
blogs have frequently discussed the Bitcoin; however, the focus of
the research community is on the Bitcoin’s safety, legal issues,
financial aspects, and the macroeconomic. The current study mainly
aims to add to the existing body literature through investigating the
impact of the Bitcoin on stock market. In this section, the
researcher discusses the impact of the Bitcoin prices on Stock
Market. In the end of this part, the authors reviews some of the
previous studies that have handled the topic of the study.

Several researchers regard the
Bitcoin as the digital gold; however, does this mean that the Bitcoin
has the same impact on stock market? There has been strong debate and
discussion on whether Bitcoin has an impact on stock market, or no.
Actually, business experts and researchers have disagreement
regarding this issue, as there are two teams with two different
opinions about the impact of the Bitcoin prices on stock market. The
first team argues that the Bitcoin has a significant correlation with
major stock market indices, for example, the study of [ CITATION Sel18 l 2057 ]
assures that both
Bitcoin and gold would serve the roles of a hedge, a safe haven and a
diversifier for oil price movements. Moreover, this study proves that
both Bitcoin and gold, but not oil, are assets where investors may
park their cash during times of political and economic turmoil.

However, the second team
argues that the Bitcoin price does not have a significant impact on
stock market[ CITATION Bau15 l 2057 ].
For example, the findings of the study of [ CITATION Men19 l 2057 ]
assures that Bitcoin is
more inefficient when compared to the gold, stock and currency
markets. Moreover, the research paper of [ CITATION Sha19 l 2057 ]
confirms that a short
position in the Bitcoin market allows hedging the risk investment for
all different financial assets. Moreover, the results of this study
assure that the out-of-sample hedging effectiveness of gold is much
superior to that of Bitcoin. Besides, the research paper of [CITATION Pri18 l 2057 ]
proves that there is a
lineal correlation, not as strong as the previous one, with the main
stock market indexes. In addition, that there is no linear
correlation with commodities.

Eventually, reviewing the
existing body literature related to the Bitcoin (the new virtual
currency) prices shows that there are sseveral studies that have been
carried out to investigate the advantages and disadvantages of
Bitcoin; however, a few papers in the existing body literature have
examined its connection and influence on the stock market. As a
result, the studies that have handled the impact of Bitcoin prices on
stock markets are comparatively few.

2.3.1.
The main objective of the study carried out by[ CITATION Sha19 l 2057 ]
is to compare gold and
Bitcoin for the G7 stock markets. For accomplishing the objectives of
this research, the researchers have employed visual and statistical
analyses. The results of this research are significant as they prove
that both gold and Bitcoin have distinct safe haven and hedging
characteristics. Besides, this study assures that Gold is an
undisputable safe haven and hedge for several G7 stock indices,
whereas Bitcoin takes these two functions in Canada. However, the
results of this study assure that the out-of-sample hedging
effectiveness of gold is much superior to that of Bitcoin.

2.3.2.
The main objective of the research paper conducted by[ CITATION Nan19 l 2057 ]
is to propose a
Bitcoin-based exchange rate of USD/EUR, and to investigate market
efficiency in the spot, futures, and forward FX markets. For
accomplishing the objectives of this study, the researchers have
decided to employ Structural-change, unit-root and Johansen tests.
The findings of this research indicate that the Bitcoin exchange rate
is a random walk and co-integrate with the FX series. In addition,
the study findings prove the long-run “unbiasedness” and
short-run “fair game” nature of the Bitcoin exchange rate.
Therefore, the findings of this study indicate weak or semi-strong
market efficiency.

2.3.3.
The study of [ CITATION Men19 l 2057 ]
has a basic objective, which is to evaluate
the efficiency of Bitcoin market compared to gold, stock and foreign
exchange markets. For accomplishing the objectives of this
study, the researchers have decided to employ a MF-DFA approach that
is suitable for the nature of this research. Eventually, the results
of this paper were highly significant as they prove that the
long-memory feature and multi-fractality of the Bitcoin market was
stronger. In addition, the findings of this research assure that
Bitcoin is more inefficient when compared to the gold, stock and
currency markets.

2.3.4.
The study conducted by [CITATION Gue19 l 2057 ]
mainly aims at investigating
the proprieties of Bitcoin in the financial markets. Besides, this
study tries to explore the conditional cross effects and volatility
spill over between Bitcoin and financial indicators using different
multivariate GARCH specifications. Therefore, the researchers of this
paper have taken into account the nature of interaction between
Bitcoin and financial variables and their transmission mechanisms
when analyzing the diversification and hedging effectiveness across
gold asset and stock market. Finally, the results of this research
indicate that all models confirm the significant returns and
volatility spillovers. In addition, this study concludes that a short
position in the Bitcoin market allows hedging the risk investment for
all different financial assets.

2.3.5.
The research paper of [CITATION Pri18 l 2057 ]
mainly aims to investigate the impact of Bitcoin
on the global World, and to discuss its relationship with the stock
exchange. Besides, this paper tries to examine the definition and
function of Bitcoin in the global world, and its presence in Ecuador.
Therefore,
the researchers of this paper have decided to conduct exploratory and
visual analyses using the evolution of Bitcoin and other market
indexes. Eventually, the findings of this paper prove that there is a
strong relationship between bitcoin, other crypto currencies, and
that there is a lineal correlation, not as strong as the previous
one, with the main stock market indexes. In addition, that there is
no linear correlation with commodities.

2.3.6.
The research paper conducted by [ CITATION Sel18 l 2057 ]
mainly aims at assessing
the roles of Bitcoin as
a hedge, or/ a safe haven or a diversifier against extreme oil price
movements, in comparison to the corresponding roles of gold. For
accomplishing the objectives of this study, the researchers have
decided to employ
a
quantile-on-quantile regression approach for capturing the dependence
structure between the considered market returns under different
Bitcoin market conditions. Finally, the findings of this research
paper assure that both Bitcoin and gold would serve the roles of a
hedge, a safe haven and a diversifier for oil price movements.
Moreover, this study proves that both Bitcoin and gold, but not oil,
are assets where investors may park their cash during times of
political and economic turmoil.

2.3.7.
The research paper carried out by [CITATION Ana18 l 2057 ]
aims at investigating
the asymmetric causal relations between Bitcoin and gold, Brent oil,
US dollar. Therefore, the authors of this research have decided to
employ the Hatemi-J (2012) test to analyze S&P 500 and BIST 100
Indexes for the weekly data of the period between November 2013 and
July 2018. Finally, the results of this paper confirm that
only a causal link going from
the Bitcoin price to S&P 500 Index. In addition, the study proves
that a change in Bitcoin prices influence the investors’ decisions
on the S&P 500 Index. However,
this study could not determine any presence of a causality relation
between Bitcoin price and other variables.

2.3.8.
The main objective of the study carried out by [ CITATION Kay18 l 2057 ]
is to study the price
fluctuations of Bitcoin under speculative environment. Therefore, the
researcher has decided to take the Public interest towards Bitcoin as
interest-driven, regulatory and political news about crypto
currencies as event-driven, and the VIX as overall investor approach
to Bitcoin market. This study concludes that after running
regressions, the only significant variable happened to be public
interest and popularity of Bitcoin. In addition, for some cases, VIX
variable also explain price fluctuations for some intervals. However,
in none of the cases event-driven variable has long- terms effect on
price fluctuations under speculative environment.

2.3.9.
The research paper carried out by[ CITATION Chi18 l 2057 ]
aims at studying the
optimal design of crypto currencies, and assessing quantitatively how
well such currencies can support bilateral trade. Thus, the
researchers of this study have decided to adopt the Dynamic Model
that depends on Lagos and Wright (2005). Eventually, this study
concludes that the current Bitcoin scheme generates a large welfare
loss of 1.4% of consumption. Besides, the study results assure that
this welfare loss can decrease substantially to 0.08% by adopting an
optimal design that reduces mining and relies exclusively on money
growth. The findings also assure that Bitcoin is not only extremely
expensive in terms of its mining costs, but also inefficient in its
long-run design.

2.3.10.
The research paper carried out by[ CITATION Sta18 l 2057 ]
mainly aims to evaluate
the value-at-risk and related measures for the Bitcoin. Besides,
this study tries to compare the reached findings with
the gold spot price time series and Standard and
Poor’s SP500 Index. For accomplishing the objectives of the study,
the researcher has decided to employ a GJR-GARCH Model. In this
model, the residuals have followed the standardized Pearson type-IV
distribution. In addition, the researcher has implemented a large
variety of value-at-risk measures and back testing criteria.
Eventually, the findings of this paper indicate that the Bitcoin is
a highly volatile currency, which violates the value-at-risk measures
more than any other asset. Besides, this study’s findings confirm
that the capital allocation ratio and higher capital requirements
influence Bitcoin investor.

2.3.11.
The research conducted by [ CITATION See17 l 2057 ]
mainly aims to investigate the
multiple factors that are translating Bitcoin (BTC) which is gaining
momentum in various fields of global finance, and to discuss how
disruptive it can be, including replacing main fiat currencies in the
financial system impacting mainly USD. Therefore, the authors of this
research have decided to employ the latest statistical tool ADANCO
1.1.1 by Henseler and Dijkstra (2015) for an-alysing the data they
have collected via building a partial least squares structural
equation model (PLS-SEM). Eventually, the results of this research
paper are important, as they will help understand the future of
global finance from multiple standpoints, especially Regulation,
Cryptocurrencies and the fiat currencies. These research findings
confirm that the Regulators may not encourage usage of Bitcoin.
However, they cannot ignore technology of Bitcoin cannot be ignored
as the number of crypto currencies are growing up day by day, and
they are replacing the fiat currencies in the markets.

2.3.12.
The research paper conducted by [ CITATION Bou17 l 2057 ]
aims to investigate the
most and the least influential factors-across the fundamental,
financial, macroeconomic, technical and speculative determinants of
the value of Bitcoin in times of economic and geopolitical chaos.
Therefore, the researchers have decided to adopt a Bayesian quantile
regression for inspecting how the structure of dependence of Bitcoin
price and its determinants varies across the entire conditional
distribution of Bitcoin price movements. Finally, this study
concludes that the most potential contributors of Bitcoin price when
the market is improving include; using Bitcoin in trade, the
uncertainty surrounding the deepening slowdown of China, Brexit and
India’s demonetization. In addition, the study indicates that the
gold price, the hash rate, and the velocity of Bitcoins in
circulation, are fundamental elements influencing the Bitcoin price
when the market is heading into decline.

2.3.13.
The research paper conducted by[CITATION VAS l 2057 ]
mainly aims to
investigate the relationship between the price of Bitcoin and a set
of other factors of economic interest. For accomplishing the
objectives of the study, the author has decided to employ the
cross-correlation analysis. Moreover,
the author has chosen the years 2013 to 2015 as the temporal basis of
this research as earlier Bitcoin prices were practically zero. In
addition, the author has conducted SWOT
analysis for Bitcoin for the same period. Finally, the results of
this study reveal that there is a strong
correlation between Bitcoin and stock market indices or other
economical factor values. Moreover, the study also suggests that
Bitcoin possesses more
benefits than risks.

2.3.14.
The research paper of [CITATION Dyh16 l 2057 ]
has a basic purpose
that is to investigate the financial asset capabilities of Bitcoin
adopting GARCH models. Therefore, the author of this research has
decided to employ the asymmetric GARCH. Eventually, the initial
asymmetric GARCH model indicate that there are various similarities
between Bitcoin to gold and the dollar. In addition, the model also
shows that Bitcoin has the same advantages as a medium of exchange.
The findings of this paper indicate that Bitcoin could be beneficial
in the field of risk management and for preparation for the negative
shocks to the market. Besides, this study’s findings assure that
the Bitcoin is something in between the American dollar and gold on a
scale from pure medium of exchange advantages to pure store of value
advantages.

2.3.15.
The main objective of the study carried out by [ CITATION BAR15 l 2057 ]
is to
introduce
the main features of Bitcoin and to analyze its price behaviour. For
accomplishing the objectives of this study, the researchers have
decided to employ several tools for collecting and analyzing the data
of the study. Eventually, the findings of this research confirm that
the price
of the most famous crypto currency ‘Bitcoin’ follows the
hypothesis of efficient markets, and it immediately reacts on
publicly announce information. In addition, this study concludes
that Bitcoin could be a good standard economic, and that interaction
of supply and demand on the market decides the price of Bitcoin.

In the current chapter, the
researcher attempted to approach as many articles as possible that
focused on the researcher variables either each alone or in relation
to each other. This was not an easy task as it consumed too much time
to reach these articles. However, these were actually beneficial for
the researcher. The articles provided the readers with a good
background about the topic of the research. It also show how good the
researchers master the knowledge about the topic as well as showing
their proficiency in listing and organizing data about the topic that
is collected from secondary source. Most of all, this chapter enabled
the researchers to select the adequate research design, approach,
instrument, and data statistical analyses techniques that are going
to be focused on through the next chapter.

The
third chapter is as usual dedicated for the presentation of the
research applied methodology. This includes the presentation of the
most adequate design for the research as well as the approach that
suits the selected design. In addition, the research conceptual model
is presented to show the relationship between the variables as
perceived by the researchers. The statistical tools and the
statistical program are referred to. Also, the research scope/ period
are given due care in this chapter.

Due
to the nature of the research that focuses on the correlation between
bitcoin and stock market index, no other research design is as
suitable as the descriptive research design. There is an agreement
that the descriptive research is always consistent with those
researches that require providing descriptions for the numbers as
well as commenting on them. Since the most important objectives in
this research is to identify the cointegration between bitcoin and
stock market index in Egypt, the researchers make use of this
descriptive research design in order to provide comprehensive
descriptions for the statistics for each variable[ CITATION Sud16 l 1033 ].
Further to that, the real data of bitcoin prices and stock market
index are described. The major characteristics about the variables
are described[ CITATION Isr16 l 2057 ].

It
can be assumed that the second most important issue that light must
be cast on through this chapter is the selection of the approach to
be implemented for the purpose of the research. Researchers are aware
that the selected approach plays a real pivotal role when doing
research. It is important that the consistent approach be taken.
Previous research and the nature of the study are the most important
determinants for the selection of the approach. Though various
definitions were given to the concept of research approach, the one
that is widely known refers to it as “those
plans and procedures that are span steps from broad assumptions to
detailed methods of data collection, analysis and interpretation“[ CITATION Sud16 l 1033 ].

It
goes without saying that the statistical nature of this project
compels the researchers to select the quantitative research approach.
In addition, the multiple merits of this approach encourages them to
select it. One very compliant definition for the quantitative
approach considers it as “the
systematic empirical investigation of observable phenomena via
statistical, mathematical or computational techniques“[ CITATION Bry15 l 1033 ].
Researchers
are aware that once they desire to make their outcomes generalizable,
the quantitative approach is suitable. This is attributed to the
well-perceived trustworthiness in the quantified findings. This
trustworthiness stimulate the researchers to generalize the reached
outcomes on various other sectors. Usually, under the umbrella of the
quantitative research, the researchers are highly subjective. Their
intervention in the results is at the minimum level. The research
hypotheses are tested suitably. Furthermore, once this approach is
applied, researchers grow more likely to create comparisons between
their results and results of prior researchers come across[ CITATION Sau12 l 1033 ].

Time
series daily data is collected for the period from 19/07/2010 to
30/10/2019 about stock market price and bitcoin prices in Egypt. This
indicates that the present research attempts to carry out comparisons
in between the outcomes over the time series of a longitudinal
implementation.

The
researchers are able to collect secondary data from Bloomberg for the
period from 19/07/2010 to 30/10/2019 on a daily basis. This secondary
data is the main source of data for the present research. Thus, the
data covers a period of nine years and three months. The overall
number of observations is 1995.

The
collected data is analyzed statistically through Eviews 10. The data
is analyzed through making use of the following statistical tests:

Descriptive
statistics methods: Standard
Deviation,
Mean, Median, Skewness and others.

Augment
Dickey Fuller (ADF)
test:
to find out whether or not data is stationary at level or 1st
difference.

Pearson’s
correlation test: to
identify the relationship degree amongst the two variables.

Pairwise
Granger
Causality test:
to test the changes of oil prices and stock market index.

Two
variables are included in the investigations of this research:
bitcoin price and stock market price in Egypt from 19/07/2010 to
30/10/2019.

Dependent
Variable

Independent
Variable

Stock
market price in Egypt

Bitcoin
price in Egypt

Figure
1 Research Conceptual Model3.8. Research Hypotheses

H0:
There
is no causal relationship between Bitcoin prices and stock market in
Egypt.

H1:
There is no causal relationship between Bitcoin prices and stock
market in Egypt.

Eviews
10 is employed for analyzing the time series data collected on a
daily basis from Bloomberg.

This
chapter played the role of the section that bridges the gap between
the empirical section of the research in chapter four and the
theoretical section in chapter two. This is dedicated for the
presentation of the methodological procedures of the research.

Through
this chapter, the researchers carry out the statistical analyses
process via the well-known statistical analysis program Eviews 10.
When the statistics come out, the researchers present their outcomes
through a number of tables. These tables are commented on. In
accordance to the outcomes of these statistics, the researchers are
expected to reach to introduce answers for their research questions
and test their hypotheses. For this purpose, some statistical tests
are conducted. On doing this the cointegration between bitcoin prices
and stock market index in Egypt will be identified for the duration
from
19/07/2010 to 30/10/2019.
The most important of these tests is actually the descriptive
statistics since this type of statistical tests provides
comprehensive descriptions for the two numerical characteristics for
the two variables (bitcoin prices and stock market index in Egypt).
In light of these descriptive statistics, the other tests are
established. Another test is the ADF-test, which is specified for
identifying whether or not the analyzed data is stationary. The third
statistical test is the Pearson’s correlation tests helps the
researchers to find out both the direction and level of correlation
between bitcoin prices and stock market index in Egypt from
19/07/2010 to 30/10/2019.
Then, the Johansen’s co-integration test is used for testing the
hypothesis of the long-term relationship between the two variables.
Finally, the Granger Causality test is used for testing the second
hypothesis about the impact of the two variables on each other.

Table
1 Descriptive statistics for Bitcoin prices and stock market index

RBITCOIN

REQYPT

Mean

0.0058

-0.0001

Median

0.0020

0.0000

Maximum

0.5247

0.1052

Minimum

-0.6009

-0.3893

Std.
Dev.

0.0701

0.0190

Skewness

0.0260

-4.5358

Kurtosis

13.2645

93.0111

Jarque-Bera

8758.2630

680318.9000

Probability

0.0000

0.0000

Observations

1995.0000

1995.0000

It
is assumed that no other statistical test is as important as
descriptive statistics especially in the domain of finance research.
Descriptive statistics do simply refer to “a brief coefficients
summary for two variables time-series”. It goes without saying that
descriptive statistics guide the researchers to possess an overall
view about the collected data and its characteristics. The most
outstanding values reached from this analysis involves Mean, Median,
Standard Deviation, and Skewness for the two variables bitcoin price
and stock market index in Egypt. The table above shows the major
features of the two variables.

In
accordance to the outcomes of table (1), it is evident that the
bitcoin price mean score value for the period from
19/07/2010 to 30/10/2019
is (0.0058) and this more than the stock market price mean score
value for the same duration (-0.0001). Likewise, the value of the
median of bitcoin price is (0.0020) which is more than the median of
stock market price in Egypt (0.0000). Concerning the value of
standard deviation, it is (0.0701) for Bitcoin prices and ((0.0190)
for stock market price in Egypt. In terms of skewness values, it is
(0.0260) for bitcoin prices and (-4.5385) for stock market price in
Egypt. This shows that a positive skewness exists for bitcoin price
and a negative skewness exists for stock market index in Egypt. Due
to the fact that skewness does not equal zero in the two variables,
it can be deduced that data of the two variables are not normally
distributed. Further to that the kurtosis values for the bitcoin
prices is (13.2645) and for stock market price I (93.0111). The
values assure that the two variables two variables are not normally
distributed.

In
order to say the data collected for the two variables is stationary
or not stationary, the researchers make use of the Augmented Dickey
Fuller (ADF) test. Which is a unit root test. In light of this test
the other coming statistical tests are dependent. For one thing, the
data is tested (stationary or not stationary) at level, then at first
difference. Once the data is found not to be stationary at level, the
researchers move to next step in the ADF test, which is the first
difference. Through the first level test, the data becomes
stationary. This phase is recognized as a pivotal one before the
phase of hypotheses testing.

Table
2 Augmented Dickey-Fuller test statistic of bitcoin and Egypt stock
index at level

t-Statistic

Prob.*

At
level

bitcoin

-1.29102

0.6359

Egypt
index

-2.91693

0.0436

In
accordance to the table (2) the data for bitcoin price and Egypt
stock market index are found to be non-stationary at level. This is
recognized as the value of probability is (0.6359)
for bitcoin and (0.0436) for Egypt index. Both of them is more than
the standard probability values 0.01 and 0.05. This means that the
researchers need to move to the step of testing stationary data at
first difference.

Table
3 Augmented Dickey-Fuller test statistic of bitcoin and Egypt stock
index at first difference

t-Statistic

Prob.*

At
first difference

bitcoin

-13.2218

0.000

Egypt
index

-38.5791

0.000

In
accordance to the table (3) the data for bitcoin price and Egypt
stock market index are found to be stationary at first difference.
This is recognized as the value of probability is (0.000)
for bitcoin and (0.000) for Egypt index. Both of them is now below
the standard probability values 0.01.

It
is agreed that the Pearson’s correlation test is applied on the
collected time series data for the two variables (bitcoin price and
Egypt stock market index) for the purpose of identifying the strength
level and the direction of the relationship that exists between the
two variables. There are points of view assuming that the most
important purpose for using the Pearson’s correlation test is to
evaluate the existence of the linear correlation between the
variables.

Table
4 Correlation test between daily bitcoin price and Egypt stock
market index

RBITCOIN

REQYPT

RBITCOIN

1

0.007

REQYPT

0.007

1

From
table (4), the outcomes of the Pearson’s correlation shows that there
is a positive and weak relationship between bitcoin and Egypt stock
market index for the period from 19/07/2010 to 30/10/2019
since
the correlation value is (0.007).

Table
5 Granger Causality Test between daily bitcoin price and Egypt
stock market index

 Null
Hypothesis:

Obs

F-Statistic

Prob. 

REQYPT
does not Granger Cause RBITCOIN

1995

1.02285

0.3598

RBITCOIN
does not Granger Cause REQYPT

0.00611

0.9939

In
light of the resulting values from the Granger causality test for the
period starting from 19/07/2010 to 30/10/2019 bitcoin price and
Egypt stock market index , it can be deduced that Egypt stock market
index does not granger cause bitcoin prices. This is evidently
attributed to the probability value, which is (0.3598). This value is
above the standard value (0.05) and (0.01). Likewise, it can be
deduced that bitcoin prices does not granger cause Egypt stock market
index. This is evidently attributed to the probability value, which
is (0.9939). This value is above the standard value (0.05) and
(0.01). Consequently, the null hypothesis is accepted and the
alternative is rejected.

So
it is assumed that (H1: There is no causal relationship between
Bitcoin prices and stock market in Egypt.).

It can be assumed that bitcoin
is one of the most important financial instruments that appeal to
investors in various areas all over the world. The value and
important of Bitcoin proved to be increasingly growing. This
encourages more people to put their investments in this novel
cryptocurrency. There is evidence that the writings that attempt to
correlate bitcoin price to other financial variables are scarce until
now. This convenient with what [ CITATION Gue19 l 1033 ]
come across.

For the period starting
from 19/07/2010 to 30/10/2019, the characteristic of the data in
terms of standard deviation, mean score,
median, skewness, and Kurtosis show that data is not normally
distributed. This is in line with the findings of [ CITATION Sel18 l 1033 ].

Bitcoin prices and Egypt stock
market index are positively correlated to each other. However, this
correlation proved to be a weak one as the value is (0.007). This can
be said to be consistent with the findings of (Vassiliadis, 2017).

Finally, non of the two
variables Bitcoin prices and Egypt stock market index granger cause
the other for the period starting
from 19/07/2010 to 30/10/2019 since the value
of prob. is below (0.05-0.01). This is consistent with the findings
of [ CITATION Kay18 l 1033 ].

This chapter has been a
pivotal one since it guided the researchers to reach the major
conclusions about the research topic. Through the statistical
analyses procedures carried out by the researchers via E-views 10,
the research hypothesis is tested. The findings are finally discussed
in comparison with findings of other prior research about the
research topic. In accordance to this chapter, the researchers
present their conclusions and recommendations in the last chapter.

The
last and fifth chapter is specified for telling the last things about
this project. In words, the conclusions about the entire project are
introduced hereafter. There are some recommendations for those who
are interested in the research topic. Finally, the researchers
introduce the limitations of this research.

The
most important objective for which this project is conducted is to
find
out if a causal relationship exists between Bitcoin and stock market
index in Egypt. The relationship between the two variables is
investigated over the period from 19/07/2010
to 30/10/2019.
This relationship is assessed in light of the data taken from
Bloomberg. Eviews 10 is applied for the purpose of data analysis. The
descriptive research design was selected as well as the quantitative
approach. Four tests were carried out to enable the researchers
answer the questions and test the hypotheses. These include
descriptive statistics, ADF, the Pearson’s correlation, and granger
causality.

The
collected data about bitcoin prices and stock market index in Egypt
from
19/07/2010 to 30/10/2019 proved not to be normally distributed where
bitcoin price skew positively and stock market index skew negatively
.

In
light of the ADF test, it is found out that data for the Egypt stock
market index and bitcoin prices from
19/07/2010 to 30/10/2019
were not stationary at level. When the test was conducted at first
difference, data turned into stationary.

In
light of the Pearson’s correlation test it was concluded that there
is a positive and weak correlation between Egypt stock market index
and bitcoin prices from
19/07/2010 to 30/10/2019.

In
accordance to the outcomes of the granger causality test, non of the
two variables Egypt stock market index and bitcoin prices from
19/07/2010 to 30/10/2019 granger cause the other

This
means that there is no causal relationship between Egypt stock market
index and bitcoin prices from
19/07/2010 to 30/10/2019.

There
is a need to investigate the relationship between stock market
indexes and bitcoin prices in many other countries.

More
factors can be taken into consideration to be investigated beside
stock market indexes as oil prices/ gold prices/ etc..

There
should be more focus on other future period periods.

Due
to the results of this research, more investors need to consider
their portfolios diversifications in a manner that they can get more
return.

The
relationship was only limited to the duration from
19/07/2010 to 30/10/2019

The
study attempted only to correlate
stock market index and bitcoin prices from
19/07/2010 to 30/10/2019
Only in one country.

References:

Bartos,
j., 2015. Does Bitcoin follow the hypothesis of efficient market?.
International Journal of Economic Sciences, Volume V(2) 10-23.

Baur , D.
G., Lee, A. D. & Hong, K., 2015. Bitcoin: Currency or
Investment?. s.l.:SSRN 2561183.

Bouoiyour,
J. & Selmi, R., 2017. The Bitcoin price formation: Beyond the
fundamental sources. s.l.:s.n.

Bryman, A.
& Bell, E., 2015. Business Research Methods” 4th edition,
s.l.: Oxford University Press.

Coindesk ,
2015. “Bitcoin price index”.
s.l.:http://www.coindesk.com/price/bitcoin- price- index.

Chiu, J. &
Koepp, T. V., 2018. The Economics of Cryptocurrencies – Bitcoin and
Beyond.

Dyhrberg,
A. H., 2016. Bitcoin, gold and the dollar –A GARCH volatility
analysis. Finance Research Letters , Volume 16, p. 85–92.

Dyhrberg,
A. H., 2016. Bitcoin, gold and the dollar –A GARCH volatility
analysis. 16, 85–92 ed. s.l.:Finance Research Letters.

Erdas, M.
L. & Caglar, A. E., 2018. Analysis of the relationships between
Bitcoin and exchange rate, commodities and global indexes by
asymmetric causality test. EASTERN JOURNAL OF EUROPEAN STUDIES,
Volume 9, Issue 2.

Guesmi ,
K., Saadi , S., Abid , I. & Ftiti , Z., 2019. Portfolio
diversification with virtual currency: Evidence from bitcoin.
International Review of Financial Analysis, Volume 63, pp. 431-437.

Israr, B.,
2016. Descriptive And analytical Research, s.l.: Slideshare.

Jacobs ,
E., 2011. Bitcoin: A Bit Too Far?. s.l.:Journal of Internet Banking
and Commerce 16: 1-4.

Kaya, Y.,
2018. Analysis of Cryptocurrency Market and Drivers of the Bitcoin
Price: Understanding the price drivers of Bitcoin. KTH Industrial
Engineering and Management.

Mensi , W.
et al., 2019. Intraday downward/upward multifractality and long
memory in Bitcoin and Ethereum markets: An asymmetric multifractal
detrended fluctuation analysis. Finance Research Letters.

Nan, Z. &
Kaizoji, T., 2019. Market efficiency of the bitcoin exchange rate:
Weak and semi-strong form tests with the spot, futures and forward
foreign exchange rates. International Review of Financial Analysis,
Volume Volume 64 , pp. 273-281.

Prieto, T.
& Belen, A., 2018. Bitcoin: Its influence on the global World
and its relationship with the stock exchange.

Reid , F.
& Harrigan , M., 2013. An Analysis of Anonymity in the Bitcoin
System. Springer 197-223 ed. s.l.:Security and Privacy in Social
Networks.

Saunders,
M., Lewis, P. & Thornhill, A., 2012. Research Methods for
Business Students” 6th edition,, s.l.: Pearson Education Limited.

Seetharaman,
A., Saravanan, A., Patwa, N. & Mehta, . J., 2017. Impact of
Bitcoin as a World Currency. Accounting and Finance Research ,
Volume Vol. 6, No. 2.

Selmi, R.,
Mensi, W., Hammoudeh, S. & Bouoiyour, J., 2018. Is Bitcoin a
hedge, a safe haven or a diversifier for oil price movements? A
comparison with gold. Energy Economics.

Shahzad,
S. J. H., Bouri, E., Roubaud, D. & Kristoufek, L., 2019. Safe
haven, hedge and diversification for G7 stock markets: Gold versus
bitcoin. Economic Modelling.

Stavroyiannis,
S., 2018. Value-at-risk and related measures for the Bitcoin.
s.l.:The Journal of Risk Finance, Vol. 19 Issue: 2, pp.127-13.

Sudeshna ,
L. & Datt, S., 2016. Importance of research approach in a
research. [Online] Available at: https://www.projectguru.in

Vassilidis,
S., 2017. Bitcoin Value Analysis Based on Cross Correlations. Jan
2017, vol. 22, no. S7 ed. Journal of Internet Banking and Commerce.
Let’s block ads! (Why?)

Do you need any assistance with this question?
Send us your paper details now
We’ll find the best professional writer for you!

 



error: Content is protected !!