Cryptocurrency Connectedness: Does Controlling for the Cross-Correlations Matter?

Thomas Wiesen and Lakshya Bharadwaj

Applied Economics Letters, 2023, vol. 30, issue 20, 2873-2880

Abstract: A growing literature has employed the existing generalized spillover measures to measure the connectedness – or market integration – of cryptocurrencies. This method, while useful, does not properly control for the cross-correlations of the cryptocurrencies when computing aggregate spillovers from all others to any given cryptocurrency, whereas the joint spillover method of Lastrapes and Wiesen (2021) does. This paper further describes the novel multivariate conditioning sets employed by the joint spillover method. By employing these two techniques and evaluating the differences in the results, we demonstrate that controlling for the cross-correlations of cryptocurrencies matters for measuring aggregate spillovers and the overall connectedness of the cryptocurrency market. Using data on ten of the most traded cryptocurrencies, we find that the generalized spillover index overestimates overall connectedness by over nine percentage points relative to the new joint spillover index. This difference varies temporally and across cryptocurrencies.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2022.2111022 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:30:y:2023:i:20:p:2873-2880

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2022.2111022

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().