Volatility in the Cryptocurrency Market
Open Economies Review (Forthcoming)
41 Pages Posted: 22 Jul 2019
Date Written: July 19, 2019
How do cryptocurrency prices evolve? Is there any interdependence among cryptocurrency returns and/or volatilities? Are there any return spillovers and volatility spillovers between the cryptocurrency market and other financial markets? To answer these questions, we use GARCH-in-mean models to examine the relationship between volatility and returns of leading cryptocurrencies, to investigate spillovers within the cryptocurrency market, and also from the cryptocurrency market to other financial markets. Overall, we find statistically significant transmission of shocks and volatilities among the leading cryptocurrencies. We also find statistically significant spillover effects from the cryptocurrency market to other financial markets in the United States, as well as in other leading economies (Germany, the United Kingdom, and Japan).
Keywords: Cryptocurrency; Financial markets; Spillover effects; GARCH-in-mean model; Asymmetric BEKK model; Volatility transmission
JEL Classification: C32, G15, G32
Suggested Citation: Suggested Citation