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Event-Driven Changes in Return Connectedness among Cryptocurrencies

Author

Listed:
  • Peter Albrecht

    (Mendel University in Brno, Faculty of Business and Economics)

  • Evzen Kocenda

    (Institute of Economic Studies, Charles University, Prague)

Abstract

Our study presents an in-depth analysis of the connectedness in returns among five major cryptocurrencies over a span from 2018 to 2023. Our work introduces novel insights via employing a recently developed bootstrap-after-bootstrap method of Greenwood-Nimmo et al. (2024) to establish a link between increases in connectedness and various systematic events. We find that major events-including both market and policy-driven shocks-trigger substantial increases in connectedness, with transmission effects persisting for up to one month. For the period under research, we identify Bitcoin and Ethereum as net return transmitters, mainly to Binance coin and Ripple. Moreover, we find that these transmissions increased by up to 20% for up to one month after the shocks occurred. Furthermore, we incorporate event-driven adjustments in portfolio optimization, quantifying optimal asset weight rebalancing in response to cryptocurrency market shocks. Our findings reveal that during the research period, Cardano and Ripple were the most effective choices in portfolio optimization. The implications of this study are significant for devising strategies in portfolio management and risk hedging, offering valuable guidance for policy formulation in the financial sector.

Suggested Citation

  • Peter Albrecht & Evzen Kocenda, 2025. "Event-Driven Changes in Return Connectedness among Cryptocurrencies," KIER Working Papers 1113, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:1113
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    References listed on IDEAS

    as
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    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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