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Decomposing interconnectedness: A study of cryptocurrency spillover effects in global financial markets

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  • Liu, Jian
  • Julaiti, Jiansuer
  • Gou, Shangde

Abstract

This paper employs a novel R2 decomposition connectivity method to analyze the spillover effects between cryptocurrencies and other markets, distinguishing between contemporaneous and lagged components. There are evidences shows cryptocurrency markets exhibit stronger contemporaneous dependency compared to lagged periods. The lagged net spillover effects in the cryptocurrency market demonstrate higher similarity to the overall net spillover effects, especially during periods of significant decline in net spillover effects. The contemporaneous net spillover effects of Fed's balance sheet show higher correlation with the overall net spillover effects during the COVID-19 pandemic.

Suggested Citation

  • Liu, Jian & Julaiti, Jiansuer & Gou, Shangde, 2024. "Decomposing interconnectedness: A study of cryptocurrency spillover effects in global financial markets," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323013223
    DOI: 10.1016/j.frl.2023.104950
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    More about this item

    Keywords

    Cryptocurrency; Fed's balance sheet; Dynamic linkages; R2 decomposition;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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