Interdependence, contagion and speculative bubbles in cryptocurrency markets

Walter Bazán-Palomino

doi:10.1016/j.frl.2022.103132

Interdependence, contagion and speculative bubbles in cryptocurrency markets

Walter Bazán-Palomino

Universidad del Pacífico

Research output: Contribution to journal › Article in a journal › peer-review

24 Scopus citations

Abstract

After detecting several bubbles during 2015–2022, this study investigates the impact of the two biggest bubbles – those of 2017 and 2021 – on interdependence and contagion among cryptocurrencies. Interdependence declines during these bubbles relative to the post-bubble periods, and there is strong evidence of contagion over the whole sample and in the post-2021 bubble period. To illustrate their impact, optimal weights, volatility, and expected shortfall of a global minimum variance portfolio are examined. While volatility is higher during bubbles, the expected shortfall is stronger in the post-bubble periods. My results provide useful information for risk management and derivative pricing.

Original language	English
Article number	103132
Journal	Finance Research Letters
Volume	49
DOIs	https://doi.org/10.1016/j.frl.2022.103132
State	Published - Oct 2022

Bibliographical note

Publisher Copyright:
© 2022 Elsevier Inc.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 9 Industry, Innovation, and Infrastructure
SDG 17 Partnerships for the Goals

Keywords

Bubbles
Contagion
Global minimum variance portfolio
Interdependence

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10.1016/j.frl.2022.103132

Cite this

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title = "Interdependence, contagion and speculative bubbles in cryptocurrency markets",

abstract = "After detecting several bubbles during 2015–2022, this study investigates the impact of the two biggest bubbles – those of 2017 and 2021 – on interdependence and contagion among cryptocurrencies. Interdependence declines during these bubbles relative to the post-bubble periods, and there is strong evidence of contagion over the whole sample and in the post-2021 bubble period. To illustrate their impact, optimal weights, volatility, and expected shortfall of a global minimum variance portfolio are examined. While volatility is higher during bubbles, the expected shortfall is stronger in the post-bubble periods. My results provide useful information for risk management and derivative pricing.",

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AU - Bazán-Palomino, Walter

PY - 2022/10

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N2 - After detecting several bubbles during 2015–2022, this study investigates the impact of the two biggest bubbles – those of 2017 and 2021 – on interdependence and contagion among cryptocurrencies. Interdependence declines during these bubbles relative to the post-bubble periods, and there is strong evidence of contagion over the whole sample and in the post-2021 bubble period. To illustrate their impact, optimal weights, volatility, and expected shortfall of a global minimum variance portfolio are examined. While volatility is higher during bubbles, the expected shortfall is stronger in the post-bubble periods. My results provide useful information for risk management and derivative pricing.

AB - After detecting several bubbles during 2015–2022, this study investigates the impact of the two biggest bubbles – those of 2017 and 2021 – on interdependence and contagion among cryptocurrencies. Interdependence declines during these bubbles relative to the post-bubble periods, and there is strong evidence of contagion over the whole sample and in the post-2021 bubble period. To illustrate their impact, optimal weights, volatility, and expected shortfall of a global minimum variance portfolio are examined. While volatility is higher during bubbles, the expected shortfall is stronger in the post-bubble periods. My results provide useful information for risk management and derivative pricing.

KW - Bubbles

KW - Contagion

KW - Global minimum variance portfolio

KW - Interdependence

UR - https://www.scopus.com/pages/publications/85134541793

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DO - 10.1016/j.frl.2022.103132

M3 - Article in a journal

AN - SCOPUS:85134541793

SN - 1544-6123

VL - 49

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 103132

ER -

Interdependence, contagion and speculative bubbles in cryptocurrency markets

Abstract

Bibliographical note

UN SDGs

Keywords

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