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Return And Volatility Spillover Effects In Leading Cryptocurrencies

Author

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  • SRINIVASAN PALAMALAI

    (School of Management (SOM), Presidency University, Rajanakunte, Yelahanka, Bangalore, Karnataka, India)

  • BIPASHA MAITY

    (School of Management (SOM), Presidency University, Rajanakunte, Yelahanka, Bangalore, Karnataka, India)

Abstract

As Cryptocurrencies are emerging as a new class of investment assets, understanding their price and volatility dynamics has begun to gather momentum, especially the volatility can influence investment decisions. Most of previous literature concentrates primarily on several aspects of Bitcoin and endeavoring to generalize them for the whole cryptocurrency markets. In this study, we attempted to examine the return and volatility spillover effects across a wide range of cryptocurrency markets, i.e. eight major cryptocurrencies (determined by market capitalization) using a Vector Error Correction approach and Diagonal BEKK Multivariate GARCH model. We found the evidence of interdependencies and volatility co-movements among the various pairs of cryptocurrency markets. However, the study suggests that there exists a limited window of opportunity for the short-term portfolio diversification benefits from the selected large-cap cryptocurrency markets.

Suggested Citation

  • Srinivasan Palamalai & Bipasha Maity, 2019. "Return And Volatility Spillover Effects In Leading Cryptocurrencies," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-20, September.
    • Handle: RePEc:wsi:gejxxx:v:19:y:2019:i:03:n:s2194565919500179
    DOI: 10.1142/S2194565919500179
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    Citations

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    Cited by:

    1. Samia Nasreen & Aviral Kumar Tiwari & Seong-Min Yoon, 2021. "Dynamic Connectedness and Portfolio Diversification during the Coronavirus Disease 2019 Pandemic: Evidence from the Cryptocurrency Market," Sustainability, MDPI, vol. 13(14), pages 1-14, July.
    2. Guo, Li & Sang, Bo & Tu, Jun & Wang, Yu, 2024. "Cross-cryptocurrency return predictability," Journal of Economic Dynamics and Control, Elsevier, vol. 163(C).
    3. Jia, Yuecheng & Wu, Yangru & Yan, Shu & Liu, Yuzheng, 2023. "A seesaw effect in the cryptocurrency market: Understanding the return cross predictability of cryptocurrencies," Journal of Empirical Finance, Elsevier, vol. 74(C).
    4. Tuğba Güz & İlayda İsabetli Fidan, 2022. "The Characteristics of Cryptocurrency Market Volatility: Empirical Study For Five Cryptocurrency," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 10(2), pages 69-84, December.
    5. Onur Özdemir, 2022. "Cue the volatility spillover in the cryptocurrency markets during the COVID-19 pandemic: evidence from DCC-GARCH and wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-38, December.

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