Financial stress and cross-asset market spillovers: evidence from a time-varying connectedness framework

Abstract

This study investigates the time-varying interactions between financial stress and selected financial assets within the Diebold–Yilmaz connectedness framework. Using a rolling-window VAR model combined with generalized forecast error variance decompositions, the analysis examines how shock transmission mechanisms across financial markets evolve over time. To assess the role of cryptocurrencies in this structure, the study adopts a comparative approach based on two samples: a long sample excluding Bitcoin (2000–2024) and a subsample including Bitcoin (2010–2024).The empirical findings reveal that overall market connectedness increases sharply during periods of systemic stress, particularly during the 2008 Global Financial Crisis and the COVID-19 pandemic, indicating a pronounced strengthening of cross-market interdependence under crisis conditions. Across both samples, the St. Louis Fed Financial Stress Index (STLFSI) consistently emerges as the strongest net transmitter of risk, highlighting the central role of financial stress in systemic shock propagation. When Bitcoin is included in the system, total connectedness becomes more volatile, and Bitcoin is found to act, on average, as a net transmitter of risk. This result suggests that cryptocurrencies may become integrated into systemic risk transmission mechanisms during periods of heightened uncertainty, challenging the view that Bitcoin functions as an unconditional safe haven. A comparison of the two samples indicates that while Bitcoin does not fundamentally alter long-run average connectedness, it significantly amplifies connectedness dynamics during short- and medium-term stress episodes.Overall, the findings underscore the time-varying and state-dependent nature of financial market interconnectedness and highlight the importance of incorporating financial stress indicators and cryptocurrencies into systemic risk monitoring frameworks. The study contributes to the literature by providing new evidence on the evolving role of financial stress and cryptocurrencies in cross-asset spillover dynamics.

Keywords

• Financial stress
• spillover effects
• cryptocurrencies
• systemic risk

Finansal stres ve varlıklar arası piyasa yayılmaları: zamanla değişen bağlılık çerçevesinden kanıtlar

Abstract

Bu çalışma, finansal stres ile seçilmiş finansal varlıklar arasındaki zamana bağlı etkileşimleri Diebold–Yılmaz connectedness çerçevesinde incelemektedir. Rolling-window VAR modeli ile genelleştirilmiş tahmin hata varyans ayrıştırmalarını birleştiren yöntem kullanılarak, finansal piyasalar arasındaki şok yayılım mekanizmalarının zaman içerisinde nasıl evrildiği analiz edilmektedir. Kripto varlıkların bu yapı içerisindeki rolünü değerlendirmek amacıyla çalışma karşılaştırmalı bir yaklaşım benimsemekte ve iki farklı örnekleme dayanmaktadır: Bitcoin’in dâhil edilmediği uzun dönemli bir örneklem (2000–2024) ve Bitcoin’in sisteme dâhil edildiği alt örneklem (2010–2024). Ampirik bulgular, özellikle sistemik stres dönemlerinde genel piyasa connectedness düzeyinin keskin biçimde arttığını ortaya koymakta; bu durum, kriz koşulları altında piyasalar arası karşılıklı bağımlılığın belirgin şekilde güçlendiğine işaret etmektedir. Özellikle 2008 Küresel Finansal Krizi ve COVID-19 pandemisi sırasında connectedness düzeylerinde gözlenen artışlar bu sonucu desteklemektedir. Her iki örneklemde de St. Louis Fed Finansal Stres Endeksi’nin (STLFSI) en güçlü net risk yayıcı olarak öne çıkması, finansal stresin sistemik şok yayılımında merkezî bir rol oynadığını göstermektedir. Bitcoin’in sisteme dâhil edilmesiyle birlikte toplam connectedness yapısının daha oynak bir hâl aldığı ve Bitcoin’in ortalama olarak net risk yayıcı konumuna geçtiği tespit edilmiştir. Bu bulgu, kripto varlıkların özellikle yüksek belirsizlik dönemlerinde sistemik risk aktarım mekanizmalarına entegre olabileceğini ve Bitcoin’in her koşulda güvenli liman işlevi gördüğü yönündeki görüşleri sorgulamaya açtığını göstermektedir. İki örneklemin karşılaştırılması, Bitcoin’in uzun dönem ortalama connectedness düzeyini köklü biçimde değiştirmediğini; ancak kısa ve orta vadeli stres dönemlerinde connectedness dinamiklerini belirgin biçimde güçlendirdiğini ortaya koymaktadır. Genel olarak bulgular, finansal piyasalardaki karşılıklı bağımlılığın zamana ve piyasa koşullarına duyarlı bir yapı sergilediğini vurgulamakta ve finansal stres göstergeleri ile kripto varlıkların sistemik risk izleme çerçevelerine dâhil edilmesinin önemine işaret etmektedir. Bu çalışma, finansal stres ve kripto varlıkların çapraz varlık yayılma dinamiklerindeki değişen rolüne ilişkin yeni ampirik kanıtlar sunarak literatüre katkı sağlamaktadır.

Keywords

• Finansal stress
• yayılma etkileri
• kripto varlıklar
• sistemik risk

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