Abstract
In this paper, we explore the volatility spillovers across different Bitcoin markets. We decompose the realized volatility into common and idiosyncratic volatilities, as well as the good and bad volatilities. Then the asymmetry in volatility spillovers between Bitcoin markets is measured by the DY (Diebold and Yilmaz) index. In addition, we construct statistics to test the asymmetry in volatility spillovers between different Bitcoin markets. The results are achieved as follows. The spillovers of systematic and idiosyncratic volatilities dominate the connectedness among different Bitcoin markets. In addition, the idiosyncratic volatility spillovers are more easily influenced by policies. Good volatility spillovers dominate the Bitcoin markets and change over time. The further results suggest that there is significant asymmetry between systematic and idiosyncratic volatility spillovers in the Bitcoin markets, while the asymmetries between good and bad volatility spillovers are heterogeneous in different markets. The findings in this paper can provide some suggestions for regulators controlling market stability and investors generating investment strategies.
Highlights
Both the market value and amount of cryptocurrency have risen greatly since 2016
The Bitcoin price volatility induced by bad information had begun to contaminate different Bitcoin markets, resulting in the joint leading roles played by good and bad volatility spillovers in the USD market
The different perfection levels of the Bitcoin markets determine the heterogeneity in leading roles of good and bad volatility spillovers among different markets
Summary
Both the market value and amount of cryptocurrency have risen greatly since 2016. the increased price has been accompanied with strong volatility. Most existing literature on systematic and idiosyncratic decomposition contribute to the oil-stock relationship and financial crisis To our knowledge, it has not been applied in the cryptocurrency market. We explore the time-varying characteristic of leading roles played by systematic and idiosyncratic volatilities in different Bitcoin markets. We continue to explore the time-varying characteristic of leading roles played by good and bad volatilities in different Bitcoin markets. In this way, we complete the construction of network connectedness of Bitcoin markets. We examine the asymmetric spillovers of systematic and idiosyncratic volatility in Bitcoin markets and lastly, asymmetric spillovers of good and bad volatility are addressed as well This could shed light on whether spillovers are higher or lower during a specific period.
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