Volatility co-movement between Bitcoin and Ether

Paraskevi Katsiampa

Finance Research Letters, 2019, vol. 30, issue C, 221-227

Abstract: Using a bivariate Diagonal BEKK model, this paper investigates the volatility dynamics of the two major cryptocurrencies, namely Bitcoin and Ether. We find evidence of interdependencies in the cryptocurrency market, while it is shown that the two cryptocurrencies' conditional volatility and correlation are responsive to major news. In addition, we show that Ether can be an effective hedge against Bitcoin, while the analysis of optimal portfolio weights indicates that Bitcoin should outweigh Ether. Understanding volatility movements and interdependencies in cryptocurrency markets is important for appropriate investment management, and our study can thus assist cryptocurrency users in making more informed decisions.

Keywords: Bitcoin; Ether; Cryptocurrency; Diagonal BEKK; Multivariate GARCH; Conditional volatility (search for similar items in EconPapers)
JEL-codes: C32 C5 G1 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (72)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:221-227

DOI: 10.1016/j.frl.2018.10.005

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