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A Predictive Framework Integrating Multi-Scale Volatility Components and Time-Varying Quantile Spillovers: Evidence from the Cryptocurrency Market

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  • Sicheng Fu
  • Fangfang Zhu
  • Xiangdong Liu

Abstract

This paper investigates the dynamics of risk transmission in cryptocurrency markets and proposes a novel framework for volatility forecasting. The framework uncovers two key empirical facts: the asymmetric amplification of volatility spillovers in both tails, and a structural decoupling between market size and systemic importance. Building on these insights, we develop a state-adaptive volatility forecasting model by extracting time-varying quantile spillover features across different volatility components. These features are embedded into an extended Log-HAR structure, resulting in the SA-Log-HAR model. Empirical results demonstrate that the proposed model outperforms benchmark alternatives in both in-sample fitting and out-of-sample forecasting, particularly in capturing extreme volatility and tail risks with greater robustness and explanatory power.

Suggested Citation

  • Sicheng Fu & Fangfang Zhu & Xiangdong Liu, 2025. "A Predictive Framework Integrating Multi-Scale Volatility Components and Time-Varying Quantile Spillovers: Evidence from the Cryptocurrency Market," Papers 2507.22409, arXiv.org.
  • Handle: RePEc:arx:papers:2507.22409
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    File URL: http://arxiv.org/pdf/2507.22409
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