Chuanwu Zheng

School of Management Science and Engineering, Anhui University of Finance and Economics

Abstract：

The Bitcoin market's dynamic interplay with established financial markets has attracted a lot of attention because of its quick expansion. This study uses a Binary Generalized Autoregressive Scoring model to examine the dynamic correlation between Bitcoin and the Shanghai Composite Index along with its five major sector indices from 2018 to 2024, taking into account the shortcomings of conventional models like DCC-GARCH in capturing asymmetry and structural breaks. Five important structural break points were found using the Pettitt test, and these were mostly related to changes in market sentiment, policy, and macroeconomic variables. The results indicate that there is a consistent positive correlation between Bitcoin and the Chinese stock market as a whole, with the real estate sector showing the smallest correlation and the energy, materials, industrial, and information technology sectors showing stronger correlations. The findings show that the GAS model more accurately captures shifts in market interconnection, offering insightful information for risk management and asset allocation.

Key Words：

Bitcoin; China’s stock market; GAS model; dynamic correlation