Is Bitcoin a risky investment compared to the stock market of Vietnam?

Abstract

In this study, we investigate the relationship between VN Index and Bitcoin based on the multivariate GARCH framework with the dataset of return series from 13 October 2013 to 29 April 2021. We find that the interactions are best explained under the VARMA mechanism, which constantly reveals the return and volatility spillovers effect between the two financial assets. Our estimations reveal a significantly positive correlation between VN Index and Bitcoin returns, which imply the diversifier role of the cryptocurrency. We assess the stock-coin portfolio under COVID-19 impacts and clarify that Bitcoin is consistently a risky investment compared the stock market of Vietnam. Indeed, the optimal holding weight of Bitcoin is approximately 5%. This finding reflects two socio-economic trends of Vietnam, those are, post-COVID policies and the digital transformation era. The findings imply recommendations on the enhancement of digital financial markets in pursuit of sustainable development goals.