The Role of Cryptocurrencies in the Brazilian and American Stock Markets

This dissertation investigates the relationship between major cryptocurrencies, Bitcoin and Ethereum, and the Brazilian and American stock markets, represented by the Ibovespa and S&P 500 indices, respectively, with the aim of assessing their potential roles as portfolio tools, specifically as diversifiers, hedges, or safe havens. The study employs Autoregressive Distributed Lag (ARDL) models and rolling regression techniques to explore the dynamic behavior of these digital assets over time, placing particular emphasis on periods of market stress. The findings reveal nuanced distinctions: Ethereum exhibits characteristics of a hedge against the Brazilian stock market, as evidenced by statistically non-significant coefficient in full-sample regression, whereas Bitcoin functions as a diversifier in that market. In contrast, both cryptocurrencies show statistically significant positive correlations with the S&P 500, suggesting a diversifying role in the American market. However, during high-stress episodes, correlations with both indices increase, signaling weak safe haven properties for both cryptocurrencies. These insights carry important implications for investors seeking to strategically incorporate digital assets into diversified portfolios, especially across varying economic environments.