Tail-event driven network of cryptocurrencies and conventional assets

Wen Jiang, Qiuhua Xu and Ruige Zhang

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: We investigate the tail risk spillover effects between cryptocurrencies and conventional assets from a systemic risk perspective, by constructing a large tail-event driven network. The results provide strong evidence for the existence of tail-risk spillovers, which challenges most literature stating the detachment of Bitcoin from traditional assets. Moreover, this paper finds two significant network factors in explaining the return of cryptocurrencies. Specifically, the risk contagion occurs under extreme market conditions, while the network diversification happens only when the market is under distress. Further sub-market analysis finds that cryptocurrencies are impacted more than stocks by the massive selloff during bear markets.

Keywords: Cryptocurrency; CoVaR; Network; Adjacency matrix; Risk spillover; Systemic risk (search for similar items in EconPapers)
JEL-codes: C58 G12 G17 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s154461232100413x

DOI: 10.1016/j.frl.2021.102424

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