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Are cryptocurrencies connected to forex? A quantile cross-spectral approach

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  • Baumöhl, Eduard

Abstract

This paper analyzes the connectedness between forex and cryptocurrencies using the quantile cross-spectral approach. The sample covers six forex and six cryptocurrencies over the period of September 2015–December 2017. Compared with the results obtained from standard correlations and DMCA, the quantile cross-spectral approach provides richer information on the dependence structure across different quantiles and frequencies. The results show that there are some significant negative dependencies between forex and cryptocurrencies from both the short- and long-term perspectives; thus, it is worth diversifying between these two asset groups. Moreover, the connection between cryptocurrencies is not as strong as is widely believed.

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  • Baumöhl, Eduard, 2019. "Are cryptocurrencies connected to forex? A quantile cross-spectral approach," Finance Research Letters, Elsevier, vol. 29(C), pages 363-372.
  • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:363-372
    DOI: 10.1016/j.frl.2018.09.002
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    Cited by:

    1. Baumöhl, Eduard & Shahzad, Syed Jawad Hussain, 2019. "Quantile coherency networks of international stock markets," EconStor Preprints 194568, ZBW - Leibniz Information Centre for Economics.
    2. Kajtazi, Anton & Moro, Andrea, 2019. "The role of bitcoin in well diversified portfolios: A comparative global study," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 143-157.
    3. Aalborg, Halvor Aarhus & Molnár, Peter & de Vries, Jon Erik, 2019. "What can explain the price, volatility and trading volume of Bitcoin?," Finance Research Letters, Elsevier, vol. 29(C), pages 255-265.
    4. Paulo Ferreira & Éder Pereira, 2019. "Contagion Effect in Cryptocurrency Market," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(3), pages 1-8, July.

    More about this item

    Keywords

    Cryptocurrencies; Forex; Quantile dependence; Cross-spectral; Diversification;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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