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Systematic risk in cryptocurrency market: Evidence from DCC-MGARCH model

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  • Canh, Nguyen Phuc
  • Wongchoti, Udomsak
  • Thanh, Su Dinh
  • Thong, Nguyen Trung

Abstract

This study provides a formal analysis on the structural breaks and volatility spillovers in seven largest cryptocurrencies including Bitcoin, Litecoin, Ripple, Stellar, Monero, Dash, and Bytecoin. Cumulative sum test for parameter stability, Granger Causality test, LM test for ARCH and Dynamic conditional correlation MGARCH model indicate that: (1) the structural breaks are universally present in these popular cryptocurrencies; and (2) the shifts spread from smaller cryptocurrencies (in market capitalization) to larger ones. Notably, volatility spillovers also exist with strong positive correlations among cryptocurrencies. Our findings highlight the limit of diversification benefits within the cryptocurrency market itself.

Suggested Citation

  • Canh, Nguyen Phuc & Wongchoti, Udomsak & Thanh, Su Dinh & Thong, Nguyen Trung, 2019. "Systematic risk in cryptocurrency market: Evidence from DCC-MGARCH model," Finance Research Letters, Elsevier, vol. 29(C), pages 90-100.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:90-100
    DOI: 10.1016/j.frl.2019.03.011
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    More about this item

    Keywords

    Structural break; Cryptocurrencies; Spillovers; Volatility; Systematic risk; DCC-MGARCH;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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