Investigating tail-risk dependence in the cryptocurrency markets: A LASSO quantile regression approach

【Author】 Linh Hoang Nguyen; Chevapatrakul, Thanaset; Yao, Kai

【Source】JOURNAL OF EMPIRICAL FINANCE

【影响因子】3.025

【Abstract】We construct the complete network of tail risk spillovers among major cryptocurrencies using the Least Absolute Shrinkage and Selection Operator (LASSO) quantile regression. We capture important features of the network, including major risk-driving and major risk-receiving currencies, and the evolution of the tail dependence among the currencies over time. Importantly, we reveal a striking finding that the right tail dependence among the cryptocurrencies is significantly stronger than the left tail counterpart. This unique characteristic may have contributed to the rise in popularity of cryptocurrencies over the last few years. Our portfolio analysis reveals that diversification in cryptocurrency investment can be accomplished simply by employing the naive equal-weighted scheme even when transaction costs are taken into account.

【Keywords】Tail risk; Spillovers; Cryptocurrency; Network

【发表时间】2020 SEP

【收录时间】2022-01-02

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