On co-dependent power-law behavior across cryptocurrencies

Klaus Grobys

Finance Research Letters, 2024, vol. 63, issue C

Abstract: Using daily returns on large-cap altcoins, this paper uses power-law functions to model cryptocurrency-specific exposure to events exhibiting potentially large standard deviations. Since our analysis provides evidence for power-law behavior in the returns on cryptocurrencies, co-fractality analysis is employed to explore potential co-dependencies in the heavy-tailed part of return distributions. The findings indicate that the potential arrival of events exhibiting large standard deviations in Bitcoin returns can hardly be diversified using other sample altcoins. Other altcoins exhibit very similar features in terms of co-dependencies. Further results show that co-fractal behavior is not specific to any subsample.

Keywords: Bitcoin; Co-fractality; Cryptocurrency; Co-dependency; Diversification; Risk (search for similar items in EconPapers)
JEL-codes: C22 F31 G11 G12 G13 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612324003258
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003258

DOI: 10.1016/j.frl.2024.105295

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().