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Spillover and Predictability of Volatility of 50 Major Cryptocurrencies: Evidence from a LASSO-Regularized Quantile VAR

Author

Listed:
  • Giovanni Bonaccolto

    (Department of Economics and Law, ``Kore" University of Enna, Italy)

  • Sayar Karmakar

    (Department of Statistics, University of Florida, USA)

  • Elie Bouri

    (Adnan Kassar School of Business, Lebanese American University, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

Previous studies examine spillover effects across the volatility of several cryptocurrencies in the mean or across quantiles without addressing the issue of high dimensionality. Using a large dataset of 50 cryptocurrencies, we employ a LASSO-regularized Quantile VAR framework and show that spillover effects differ across low, medium, and high volatility regimes, especially when evaluated dynamically over time, with sharp increases around tail events such as the war in Ukraine. Importantly, we demonstrate that the LASSO-QVAR model delivers statistically significant forecasting improvements over its univariate counterpart, underscoring the role of interconnectedness in enhancing volatility prediction across cryptocurrencies.

Suggested Citation

  • Giovanni Bonaccolto & Sayar Karmakar & Elie Bouri & Rangan Gupta, 2025. "Spillover and Predictability of Volatility of 50 Major Cryptocurrencies: Evidence from a LASSO-Regularized Quantile VAR," Working Papers 202538, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202538
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    References listed on IDEAS

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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