TY - JOUR
T1 - Does volatility connectedness across major cryptocurrencies behave the same at different frequencies? A portfolio risk analysis
AU - Mensi, Walid
AU - Khamis Hamed Al-Yahyaee
AU - Idries Mohammad Wanas Al-Jarrah
AU - Xuan Vinh Vo
AU - Sang Hoon Kang
N1 - Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2021
Y1 - 2021
N2 - This study investigates dynamic frequency connectedness for volatility differences among eight popular cryptocurrencies (Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple, Nem and Stellar). It employs the methodologies of Diebold and Yilmaz (2014; 2016) and Baruník and Křehlík (2018). Furthermore, an analysis of diversification benefits and downside risk reductions is carried out. The results demonstrated dynamic spillovers, which intensified after 2017. Furthermore, Bitcoin, Ethereum, and Litecoin are net transmitters of risk, which can be a contagion source; Dash, Ripple, Monero, Stellar, and Nem are net receivers of risk. Moreover, the short-term risk spillover is more pronounced than the medium- and long-term risk spillovers, which also increased after 2017. The directional spillovers among cryptocurrencies is sensitive to frequencies. Finally, adding a cryptocurrency to a benchmark Bitcoin portfolio provides diversification benefits and downside risk reductions. In contrast, adding Bitcoin to a cryptocurrency portfolio do not offers diversification opportunities.
AB - This study investigates dynamic frequency connectedness for volatility differences among eight popular cryptocurrencies (Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple, Nem and Stellar). It employs the methodologies of Diebold and Yilmaz (2014; 2016) and Baruník and Křehlík (2018). Furthermore, an analysis of diversification benefits and downside risk reductions is carried out. The results demonstrated dynamic spillovers, which intensified after 2017. Furthermore, Bitcoin, Ethereum, and Litecoin are net transmitters of risk, which can be a contagion source; Dash, Ripple, Monero, Stellar, and Nem are net receivers of risk. Moreover, the short-term risk spillover is more pronounced than the medium- and long-term risk spillovers, which also increased after 2017. The directional spillovers among cryptocurrencies is sensitive to frequencies. Finally, adding a cryptocurrency to a benchmark Bitcoin portfolio provides diversification benefits and downside risk reductions. In contrast, adding Bitcoin to a cryptocurrency portfolio do not offers diversification opportunities.
KW - Connectedness network
KW - Cryptocurrency markets
KW - Diversification analysis
KW - Dynamic spillovers
KW - Frequency-domain space
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U2 - 10.1016/j.iref.2021.05.009
DO - 10.1016/j.iref.2021.05.009
M3 - Article
SN - 1059-0560
VL - 76
SP - 96
EP - 113
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -