Investigating volatility transmission and hedging properties between Bitcoin and Ethereum

By Christina Beneki, Alexandros Koulis, N. Kyriazis, Stephanos Papadamou. 2019

160 citations recorded by the source corpus.

Abstract This paper sets out to test the hypothesis whether volatility spillovers and hedging abilities exist between Bitcoin and Ethereum by a multivariate BEKK-GARCH methodology and impulse response analysis applied within a VAR model since the launch of Ethereum up to June 2018. The findings reveal significant swaps in the time-varying correlation and a delayed positive response of Bitcoin volatility on a positive volatility shock on Ethereum returns. The overarching implications of the results are that Bitcoin and Ethereum although presented some diversifying capabilities over the first years of the study these capabilities are recently significantly reduced. Moreover, the unidirectional volatility transmission from Ethereum to Bitcoin implies that profitable trading strategies may be established on a newly developed derivative market with consequences against market efficiency.

Subfields: Economics and Econometrics, Finance, Information Systems

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Citations in the corpus

Statistical Arbitrage in Cryptocurrency Markets (2019, methodology): “Beneki et al. (2019) dive deeper into this topic and test for volatility spillovers and hedging abilities between Bitcoin and Ethereum using impulse response analysis and a multivariate BEKK-GARCH model.”
A systematic review of the bubble dynamics of cryptocurrency prices (2020, unknown): “…and Kumar [2019]); derivative development (Akyildirim et al. [2019]); contagion eﬀects (Handika et al. [2019]; Omane-Adjepong and Alagidede [2019]; Beneki et al. [2019]); evidence of price clustering (Urquhart [2017]; Kallinterakis and Wang [2019]), pricing bubbles (Corbet et al. [2018]),…”
Cryptocurrency trading: a comprehensive survey (2020, methodology): “[21] tested hedging abilities between Bitcoin and Ethereum by a multivariate BEKK-GARCH methodology and impulse response analysis within VAR model.”
Does bitcoin co-move and share risk with Sukuk and world and regional Islamic stock markets? Evidence using a time-frequency approach (2020, background): “Bitcoin has given rise to a series of alternative coins such as Ethereum, Ripple, Litecoin, among others (Beneki et al., 2019).”