Do cryptocurrencies provide better hedging? Evidence from major equity markets during COVID-19 pandemic

•We examine the risk spillover and hedging effectiveness between these two assets.•We employ copula models to assess the dependence and risk spillover from Bitcoin and Ethereum to international stock markets.•COVID-19 has also increased the risk spillover from Bitcoin and Ethereum to stock market returns.•The cost of hedging has increased during COVID-19.•Cryptocurrencies cannot provide incremental gains by hedging the risk of stock markets during COVID-19. Using the five-minute interval price data of two cryptocurrencies and eight stock market indices, we examine the risk spillover and hedging effectiveness between these two assets. Our approach provides a comparative assessment encompassing the pre-COVID-19 and COVID-19 sample periods. We employ copula models to assess the dependence and risk spillover from Bitcoin and Ethereum to stock market returns during both the pre-COVID-19 and COVID-19 periods. Notably, the COVID-19 pandemic has increased the risk spillover from Bitcoin and Ethereum to stock market returns. The findings vis-à-vis portfolio weights and hedge effectiveness highlight hedging gains; however, optimal investments in Bitcoin and Ethereum have reduced during the COVID-19 pandemic, while the cost of hedging has increased during this period. The findings also confirm that cryptocurrencies cannot provide incremental gains by hedging stock market risk during the COVID-19 pandemic.