Cryptocurrencies, Mainstream Asset Classes and Risk Factors - A Study of Connectedness

21 Pages Posted: 31 Aug 2018 Last revised: 20 Jun 2019

See all articles by George Milunovich

George Milunovich

Macquarie University - Department of Economics; Macquarie University, Macquarie Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 23, 2018


We investigate connectedness within and across two major groups or assets: i) five popular cryptocurrencies, and ii) six major asset classes plus two commonly employed risk factors. Granger-causality tests uncover six direct channels of causality from the elements of the mainstream assets/risk factors group to digital assets. On the other hand, there are two statistically significant causal links going in the other direction. In order to provide some perspective on the magnitude of the uncovered linkages we supplement the analysis by estimating networks from forecast error variance decompositions. The estimated connectedness within the groups is relatively large, whereas the linkages across the two groups are small in comparison. Namely, less than 2.2 percent of future uncertainty of any cryptocurrency is sourced from all non-crypto assets combined, while the joint contribution of all digital assets to non-crypto uncertainty does not exceed 1.5 percent.

Keywords: Bitcoin, Cryptocurrencies, Connectedness, Major Asset Classes, Risk Factors, Network, Granger Causality, Forecast Error Variance Decomposition

JEL Classification: C3, C32, G1

Suggested Citation

Milunovich, George, Cryptocurrencies, Mainstream Asset Classes and Risk Factors - A Study of Connectedness (August 23, 2018). Macquarie University Faculty of Business & Economics Research Paper. Available at SSRN: or

George Milunovich (Contact Author)

Macquarie University - Department of Economics ( email )

Sydney NSW 2109

Macquarie University, Macquarie Business School ( email )

New South Wales 2109

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