A crypto-stock weekend effect: Predicting Monday stock returns using weekend cryptocurrency returns

This study examines the predictive power of weekend cryptocurrency performance on Monday stock returns. Using a Bayesian framework and Kalman filter, we analyze 20 of the largest cryptocurrencies, covering about 85% of market capitalization. Our results show a strong asymmetry: negative weekend returns significantly predict Monday equity declines, while positive returns have no effect. This pattern remains robust across benchmarks, including the Nasdaq, Russell 2000, S&P sector indices, and the S&P Crypto Index. The transmission mechanism strengthens markedly after the May 2022 LUNA collapse, signaling a structural break in crypto–equity dynamics. Our findings highlight the growing role of cryptocurrencies as transmitters of systemic risk and carry implications for forecasting, portfolio management, and financial stability monitoring. • We identify a novel crypto-stock weekend effect, where negative weekend crypto returns predict Monday stock market declines. • The effect is asymmetric: negative crypto movements have predictive power, while positive returns do not. • A Kalman filter reveals that the predictive relationship strengthened after the LUNA crash in May 2022 and the following FTX crisis. • A Hidden Markov Model confirms a structural break in crypto–stock return dynamics post-LUNA crash.