Extreme tail network analysis of cryptocurrencies and trading strategies

Syed Jawad Hussain Shahzad, Elie Bouri, Tanveer Ahmad and Muhammad Abubakr Naeem

Finance Research Letters, 2022, vol. 44, issue C

Abstract: We examine the median- and tail-based return interdependence among cryptocurrencies under both normal and extreme market conditions. Using daily data and combining the LASSO technique with quantile regression within a framework of network analysis, the main results show the following: Interdependence is higher at tails than at medians, especially the right tail. Bitcoin is not the leading risk transmitter or receiver, but this role is taken by smaller cryptocurrencies. The volatilities of market, size, and momentum drive return connectedness and clustering coefficients under both normal and extreme market conditions. Finally, profitable trading strategies are constructed and evaluated.

Keywords: Bitcoin; Cryptocurrencies; Tail network of spillovers; Quantile; LASSO; Trading strategies (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001872

DOI: 10.1016/j.frl.2021.102106

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