Co-movement in crypto-currency markets: evidences from wavelet analysis

【Author】 Kumar, Anoop S.; Ajaz, Taufeeq

【Source】FINANCIAL INNOVATION

【影响因子】6.793

【Abstract】We study the time varying co-movement patterns of the crypto-currency prices with the help of wavelet-based methods; employing daily bilateral exchange rate of four major crypto-currencies namely Bitcoin, Ethereum, Lite and Dashcoin. First, we identify Bitcoin as potential market leader using Wavelet multiple correlation and Cross correlation. Further, Wavelet Local Multiple Correlation for the given crypto-currency prices are estimated across different time-scales. From the results, it is found that that the correlation follows an aperiodic cyclical nature, and the crypto-currency prices are driven by Bitcoin price movements. Based on the results obtained, we suggest that constructing a portfolio based on crypto-currencies may be risky at this point of time as the other crypto-currency prices are mainly driven by Bitcoin prices, and any shocks in the latter is immediately transformed to the former.

【Keywords】Bitcoin; Co-movement; Crypto-currencies; Wavelets

【发表时间】2019 12-Jul

【收录时间】2022-01-02

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