Citation:

Mqinisi Sibanda, Abdul Moin. "Volatility Spillovers between Bitcoin and Indonesian Stock Markets: Evidence from Islamic and Conventional Equity Indices" International Research Journal of Economics and Management Studies, Vol. 5, No. 6, pp. 23-37, 2026. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V5I6P103

Abstract:

This study examines the volatility spillover effects between Bitcoin and Indonesian stock markets while assessing the effectiveness of Sharia screening in insulating Indonesian Islamic stocks from external crypto shocks, relative to conventional equity markets during periods of financial stress. Using daily data from January 2018 to December 2024, the study employs GARCH (1,1), Granger causality, Dynamic Conditional Correlation (DCC-GARCH), and the Diebold–Yilmaz spillover index to analyze volatility persistence, return transmission, and market connectedness between Bitcoin, the Indonesian Stock Exchange Index (IDX), and the Jakarta Islamic Index (JII). The findings highlight that volatility persistence strengthened following the COVID-19 pandemic, while Granger causality results reveal a unidirectional transmission running from Bitcoin to Indonesian equity markets during the post-COVID period. DCC-GARCH estimates further show weak but increasing time-varying correlations between Bitcoin and both stock indices, suggesting a gradual strengthening of market integration. However, the Islamic stock index does not exhibit significantly lower correlation or spillover exposure relative to the conventional market during periods of heightened Bitcoin volatility. Overall, the findings suggest that Sharia screening alone may provide limited insulation from cryptocurrency-related financial contagion during turbulent market conditions.

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Keywords:

Bitcoin (BTC), Volatility Spillover, Islamic Equity Markets, Indonesia, Sharia Screening, Financial Contagion, GARCH (1.1), DCC-GARCH.