Asymmetric tail dependence in cryptocurrency markets: A Model-free approach

Abstract

This paper investigates extreme tail dependence between cryptocurrencies and the S&P 500 index using a model-free approach. It appears that any symmetric model fails to explain the correlation structure in major cryptocurrency returns. Moreover, the sample downward tail correlations between cryptocurrencies and the equity market are much greater than the upward tail ones. The disadvantages of cryptocurrencies as an asset class might be more lively because cryptocurrencies entail high asymmetric tail dependence, especially when the equity market is going down.