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.
Nota bibliográficaFunding Information:
I would like to thank Ben Iverson, Paolo Pasquariello, and Diego Winkelried for their insightful comments and suggestions. I am grateful to participants at the XXIII Applied Economics Meeting, the 27th International Conference Computing in Economics and Finance (CEF) 2021, and the 7th Rimini Center for Economic Analysis (RCEA) Time Series Workshop. Also, the comments from an anonymous referee greatly improved the paper. Further, I am grateful to the support of the Editor-in-Chief, Jonathan Batten.
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