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Interdependence, contagion and speculative bubbles in cryptocurrency markets

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  • Bazán-Palomino, Walter

Abstract

After detecting several bubbles during 2015–2022, this study investigates the impact of the two biggest bubbles – those of 2017 and 2021 – on interdependence and contagion among cryptocurrencies. Interdependence declines during these bubbles relative to the post-bubble periods, and there is strong evidence of contagion over the whole sample and in the post-2021 bubble period. To illustrate their impact, optimal weights, volatility, and expected shortfall of a global minimum variance portfolio are examined. While volatility is higher during bubbles, the expected shortfall is stronger in the post-bubble periods. My results provide useful information for risk management and derivative pricing.

Suggested Citation

  • Bazán-Palomino, Walter, 2022. "Interdependence, contagion and speculative bubbles in cryptocurrency markets," Finance Research Letters, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003555
    DOI: 10.1016/j.frl.2022.103132
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    References listed on IDEAS

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    More about this item

    Keywords

    Interdependence; Contagion; Bubbles; Global minimum variance portfolio;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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