Modelling Joint Dynamics of Stock Market Indices

The work is primarily concerned with effects of CCi30 cryptocurrency index, exchange rate (USD/RUB), Brent oil price and some major world stock indices on RTS index. Despite plethora of literature regarding this issue, there is almost no research done with crypto currency index. Additionally, the work addresses the issue of using crypto currencies for portfolio diversification and risk hedging. First part of the thesis is devoted to constructing VECM model for finding long term equilibrium among assets, while in the second part DCC-GARCH model is constructed and conditional correlations between assets are estimated. Time period was divided into two subsamples. For the first period from Jan 2015 to Jan 2018 all of the variables were important for a long run equilibrium, with DAX and USDRUB exchange rate having significant coefficients before error correction term, while for the second period from Jan 2018 to March 2020 a long run equilibrium vanished. Dynamic conditional correlations turned out to be volatile but change within some limits, correlations of RTS with major stock indices were positive for both periods and close to 0 with CCi30 crypto index. Crypto index CCi30’s correlations with major stock indices were very close to 0 for the first period, and were positive for the second one with no significant trends in both periods, indicating that cryptocurrency is not as beneficial for hedging as more traditional assets like gold.