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 language | English |
|---|---|
| Title of host publication | Advanced studies of financial technologies and cryptocurrency markets |
| Editors | Lukáš Pichl, Cheoljun Eom, Enrico Scalas, Taisei Kaizoji |
| Publisher | Springer Singapore |
| Pages | 233-256 |
| Number of pages | 24 |
| ISBN (Electronic) | 978-981-15-4498-9 |
| ISBN (Print) | 978-981-15-4497-2 |
| DOIs | |
| State | Published - 1 Jan 2020 |
Bibliographical note
Publisher Copyright:© Springer Nature Singapore Pte Ltd. 2020.
Keywords
- Bitcoin
- Fork
- Time-varying correlation
- Volatility risk
