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Cryptocurrency spillovers and correlations: inefficiency and co-movement

Author

Listed:
  • Dirk G. Baur

    (The University of Western Australia)

  • Lai T. Hoang

    (The University of Western Australia
    Monash Business School)

Abstract

This paper uses a novel econometric framework to dissect connectedness into spillovers and correlations. The results based on a sample of the largest cryptocurrencies show that spillovers play a small role relative to correlations. This finding implies that the crypto market is highly efficient as information is processed quickly and minimal lagged giving and receiving of information occurs. Tether stands out for its relatively high auto-spillovers emphasizing its special role as a stablecoin. We also find increased correlations during the COVID-19 outbreak consistent with financial contagion but no significant increase in spillovers. Graphical Abstract

Suggested Citation

  • Dirk G. Baur & Lai T. Hoang, 2024. "Cryptocurrency spillovers and correlations: inefficiency and co-movement," Digital Finance, Springer, vol. 6(2), pages 203-224, June.
    • Handle: RePEc:spr:digfin:v:6:y:2024:i:2:d:10.1007_s42521-023-00099-5
    DOI: 10.1007/s42521-023-00099-5
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    More about this item

    Keywords

    Cryptocurrencies; Bitcoin; Spillovers; Connectedness;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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