An Empirical Study of Volatility in Cryptocurrency Market

Hemendra Gupta and Rashmi Chaudhary ()
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Hemendra Gupta: Department of Finance, Jaipuria Institute of Management, Lucknow 226010, India
Rashmi Chaudhary: Department of Finance, Jaipuria Institute of Management, Lucknow 226010, India

JRFM, 2022, vol. 15, issue 11, 1-14

Abstract: Cryptocurrencies have gained a lot of attraction across the globe. Most observers of the cryptocurrency market will agree that crypto volatility is in a different league altogether. There has been a growing need to understand the nature of volatility in cryptocurrency. This paper analyzes the performance of four mostly traded, different cryptocurrencies in terms of their risk and return. The relationship between the return and returns volatility among different currencies has been examined considering the daily closing prices from 1 January 2017 to 30 June 2022, using the family of the GARCH model. The study has explored the spillover and asymmetric effect of volatility by using the DCC GARCH model and EGARCH model, respectively. The causal behavior among different cryptocurrencies has also been examined using Granger causality. There has been a strong spillover effect among different cryptocurrencies, Bitcoin and Ether, which are the top two cryptocurrencies with the highest market capitalization which have exhibited an asymmetric impact in their volatility as compared to the other two currencies, which are Litecoin and XRP.

Keywords: volatility; cryptocurrency; GARCH; MGARCH; DCC GARCH; EGARCH (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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