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Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data

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  • Mensi, Walid
  • Rehman, Mobeen Ur
  • Vo, Xuan Vinh
  • Kang, Sang Hoon

Abstract

This study examines the nonlinear multiscale relationships and spillovers among the main cryptocurrencies (Bitcoin, Bitcoin cash, Ethereum, Litecoin, DASH, Ripple, and Monero) using spillover index methodology and wavelet approaches to hourly and daily price data. The results provide evidences of dynamic spillovers among cryptocurrencies. News releases influence the instability of spillovers. Monero is the largest transmitter of risk, and Ethereum is the largest receiver of risk from other markets. Monero and Ripple are net contributors of spillovers, whereas Bitcoin, DASH, Ethereum, and Litecoin are net receivers of spillovers. The correlation ranks for different scales show that the correlations increase with scale, indicating higher diversification benefits at low scales. A mixed portfolio composed of Bitcoin and other cryptocurrencies offers advantages over individual Bitcoin portfolios, particularly on a lower scale. Finally, the optimal portfolio weight shows that cryptocurrencies should hold more BTC than other cryptocurrencies.

Suggested Citation

  • Mensi, Walid & Rehman, Mobeen Ur & Vo, Xuan Vinh & Kang, Sang Hoon, 2024. "Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 449-479.
    • Handle: RePEc:eee:ecanpo:v:82:y:2024:i:c:p:449-479
    DOI: 10.1016/j.eap.2024.03.021
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    More about this item

    Keywords

    Cryptocurrency; Spillover; Hedging; High frequency; Wavelet;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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