Cryptocurrency Connectedness: Does Controlling for the Cross-Correlations Matter?

【Author】 Wiesen, Thomas F. P.; Bharadwaj, Lakshya

【Source】APPLIED ECONOMICS LETTERS

【影响因子】1.287

【Abstract】A growing literature has employed the existing generalized spillover measures to measure the connectedness - or market integration - of cryptocurrencies. This method, while useful, does not properly control for the cross-correlations of the cryptocurrencies when computing aggregate spillovers from all others to any given cryptocurrency, whereas the joint spillover method of Lastrapes and Wiesen (2021) does. This paper further describes the novel multivariate conditioning sets employed by the joint spillover method. By employing these two techniques and evaluating the differences in the results, we demonstrate that controlling for the cross-correlations of cryptocurrencies matters for measuring aggregate spillovers and the overall connectedness of the cryptocurrency market. Using data on ten of the most traded cryptocurrencies, we find that the generalized spillover index overestimates overall connectedness by over nine percentage points relative to the new joint spillover index. This difference varies temporally and across cryptocurrencies.

【Keywords】Bitcoin; connectedness; cryptocurrency; market integration; variance decomposition; volatility spillovers

【发表时间】

【收录时间】2022-09-22

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-数字货币