Bitcoin and its offspring: A volatility risk approach

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

This study examines the relationship between the return on Bitcoin and the returns on its forks (Litecoin, Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, and Bitcoin Private). I obtain volatility series and time-varying correlation coefficients (Bitcoin with each of its forks) based on both univariate and multivariate GARCH models (EWMA, DCC, and BEKK). In terms of volatility, the gains of using a multivariate volatility approach are not substantial. However, the three multivariate volatility models offer a better estimation of the time-varying correlation. This study provides evidence that the volatility of Bitcoin forks and the volatility of Bitcoin are dynamically related, and there is a transmission of volatility risk from Bitcoin forks to Bitcoin. The results suggest that Bitcoin and its forks behave as crypto-currencies during bad times and as assets during good times. Also, for most of the sample period, Bitcoin forks do not offer a hedge against Bitcoin risk.
Original languageEnglish
Title of host publicationAdvanced studies of financial technologies and cryptocurrency markets
EditorsLukáš Pichl, Cheoljun Eom, Enrico Scalas, Taisei Kaizoji
PublisherSpringer Singapore
Pages233-256
Number of pages24
ISBN (Electronic)978-981-15-4498-9
ISBN (Print)978-981-15-4497-2
DOIs
StatePublished - 2020

Fingerprint

Dive into the research topics of 'Bitcoin and its offspring: A volatility risk approach'. Together they form a unique fingerprint.

Cite this