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Financial Bubbles: A Study of Co-Explosivity in the Cryptocurrency Market

Arianna Agosto and Alessia Cafferata ()
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Alessia Cafferata: Department of Economics and Statistics, University of Siena, 53100 Siena, Italy

Risks, 2020, vol. 8, issue 2, 1-14

Abstract: Cryptocurrencies have recently captured the interest of the econometric literature, with several works trying to address the existence of bubbles in the price dynamics of Bitcoins and other cryptoassets. Extremely rapid price accelerations, often referred to as explosive behaviors, followed by drastic drops pose high risks to investors. From a risk management perspective, testing the explosiveness of individual cryptocurrency time series is not the only crucial issue. Investigating co-explosivity in the cryptoassets, i.e., whether explosivity in one cryptocurrency leads to explosivity in other cryptocurrencies, allows indeed to take into account possible shock propagation channels and improve the prediction of market collapses. To this aim, our paper investigates the relationships between the explosive behaviors of cryptocurrencies through a unit root testing approach.

Keywords: cryptocurrencies; Bitcoin; financial bubbles; co-explosivity (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2020
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