Multiresolution analysis and spillovers of major cryptocurrency markets

Maurice Omane-Adjepong and Imhotep Alagidede ()

Research in International Business and Finance, 2019, vol. 49, issue C, 191-206

Abstract: The paper explores market coherencies and volatility causal linkages of seven leading cryptocurrencies for a sample period from August 8, 2014 to February 2, 2018. Wavelet-based methods are used to examine market connectedness. Parametric and nonparametric tests are employed to investigate direction of volatility spillovers of the assets. Highlights of our results indicate that: (1) probable diversification benefits are confined from intraweek to monthly scales for specific market pairs, and also for the investment basket having all seven assets; (2) incremental predictive power becomes useful in unveiling the nonlinear nature of volatility feedback linkages within time-scales; and (3) the level of connectedness and volatility causal linkages are found to be sensitive to trading scales and the proxy for market volatility. Based on these results, investors and risk managers are cautioned to incorporate such market dynamics in any adopted trading strategy for these asset markets. We believe our findings hold much relevance for portfolio diversification and risk management.

Keywords: Cryptocurrency; Co-movement; Feedback linkages; MODWT; Diversification (search for similar items in EconPapers)
JEL-codes: C22 F21 G1 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:49:y:2019:i:c:p:191-206

DOI: 10.1016/j.ribaf.2019.03.003

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