Asymmetric volatility of the US dollar index in the stock and cryptocurrency market during the Russia-Ukraine war

Abstract

In this study, we analyse if changes in the US dollar index (USDX) have a volatility and asymmetric effect on stock and cryptocurrency market returns in light of the Russia-Ukraine war. We estimate an asymmetric dynamic conditional correlation model (ADCC) that shows the short-term and long-term volatility persistence and asymmetric effect for ten leading cryptocurrencies and stock markets. Except for XRP, ADA, USA and Japan, all other cryptocurrencies and stock markets exhibit significantly higher volatility spillover from USDX. The result also indicates instability in USDX has a significant asymmetric effect in seven cryptocurrencies and four stock markets. A salient contribution concerns the suggestions for policymakers to monitor the cross-market shock, volatility spillover and asymmetric effect, which will assist them in making the cryptocurrencies and stocks more immune to the shock from USDX in times of turmoil.