Asymmetric connectedness between conventional and Islamic cryptocurrencies: Evidence from good and bad volatility spillovers

Elie Bouri, Mahdi Ghaemi Asl, Sahar Darehshiri and David Gabauer
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Elie Bouri: Lebanese American University
Mahdi Ghaemi Asl: Kharazmi University, Faculty of Economics
Sahar Darehshiri: American University of Sharjah

Financial Innovation, 2024, vol. 10, issue 1, 1-26

Abstract: Abstract This paper examines the dynamics of the asymmetric volatility spillovers across four major cryptocurrencies comprising nearly 61% of cryptocurrency market capitalization and covering both conventional (Bitcoin and Ethereum) and Islamic (Stellar and Ripple) cryptocurrencies. Using a novel time-varying parameter vector autoregression (TVP-VAR) asymmetric connectedness approach combined with a high frequency (hourly) dataset ranging from 1st June 2018 to 22nd July 2022, we find that (i) good and bad spillovers are time-varying; (ii) bad volatility spillovers are more pronounced than good spillovers; (iii) a strong asymmetry in the volatility spillovers exists in the cryptocurrency market; and (iv) conventional cryptocurrencies dominate Islamic cryptocurrencies. Specifically, Ethereum is the major net transmitter of positive volatility spillovers while Stellar is the main net transmitter of negative volatility spillovers.

Keywords: Cryptocurrencies; TVP-VAR; Dynamic connectedness; Asymmetric connectedness; Volatility spillovers (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1186/s40854-024-00636-0

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