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Asymmetric connectedness between conventional and Islamic cryptocurrencies: Evidence from good and bad volatility spillovers

Author

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  • Elie Bouri

    (Lebanese American University
    Korea University Business School)

  • Mahdi Ghaemi Asl

    (Kharazmi University, Faculty of Economics)

  • Sahar Darehshiri

    (American University of Sharjah)

  • David Gabauer

    (Academy of Data Science in Finance
    Johannes Kepler University)

Abstract

This paper examines the dynamics of the asymmetric volatility spillovers across four major cryptocurrencies comprising nearly 61% of cryptocurrency market capitalization and covering both conventional (Bitcoin and Ethereum) and Islamic (Stellar and Ripple) cryptocurrencies. Using a novel time-varying parameter vector autoregression (TVP-VAR) asymmetric connectedness approach combined with a high frequency (hourly) dataset ranging from 1st June 2018 to 22nd July 2022, we find that (i) good and bad spillovers are time-varying; (ii) bad volatility spillovers are more pronounced than good spillovers; (iii) a strong asymmetry in the volatility spillovers exists in the cryptocurrency market; and (iv) conventional cryptocurrencies dominate Islamic cryptocurrencies. Specifically, Ethereum is the major net transmitter of positive volatility spillovers while Stellar is the main net transmitter of negative volatility spillovers.

Suggested Citation

  • Elie Bouri & Mahdi Ghaemi Asl & Sahar Darehshiri & David Gabauer, 2024. "Asymmetric connectedness between conventional and Islamic cryptocurrencies: Evidence from good and bad volatility spillovers," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-26, December.
    • Handle: RePEc:spr:fininn:v:10:y:2024:i:1:d:10.1186_s40854-024-00636-0
    DOI: 10.1186/s40854-024-00636-0
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