Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data

Walid Mensi, Mobeen Ur Rehman, Xuan Vinh Vo and Sang Hoon Kang

Economic Analysis and Policy, 2024, vol. 82, issue C, 449-479

Abstract: This study examines the nonlinear multiscale relationships and spillovers among the main cryptocurrencies (Bitcoin, Bitcoin cash, Ethereum, Litecoin, DASH, Ripple, and Monero) using spillover index methodology and wavelet approaches to hourly and daily price data. The results provide evidences of dynamic spillovers among cryptocurrencies. News releases influence the instability of spillovers. Monero is the largest transmitter of risk, and Ethereum is the largest receiver of risk from other markets. Monero and Ripple are net contributors of spillovers, whereas Bitcoin, DASH, Ethereum, and Litecoin are net receivers of spillovers. The correlation ranks for different scales show that the correlations increase with scale, indicating higher diversification benefits at low scales. A mixed portfolio composed of Bitcoin and other cryptocurrencies offers advantages over individual Bitcoin portfolios, particularly on a lower scale. Finally, the optimal portfolio weight shows that cryptocurrencies should hold more BTC than other cryptocurrencies.

Keywords: Cryptocurrency; Spillover; Hedging; High frequency; Wavelet (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:82:y:2024:i:c:p:449-479

DOI: 10.1016/j.eap.2024.03.021

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