Good vs. bad volatility in major cryptocurrencies: The dichotomy and drivers of connectedness

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985556%3A_____%2F24%3A00598958" target="_blank" >RIV/67985556:_____/24:00598958 - isvavai.cz</a>

Alternative codes found

RIV/00216208:11230/24:10488688

Result on the web

<a href="https://www.sciencedirect.com/science/article/pii/S1042443124001288?via%3Dihub" target="_blank" >https://www.sciencedirect.com/science/article/pii/S1042443124001288?via%3Dihub</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.intfin.2024.102062" target="_blank" >10.1016/j.intfin.2024.102062</a>

Result language

angličtina

Original language name

Good vs. bad volatility in major cryptocurrencies: The dichotomy and drivers of connectedness

Original language description

Cryptocurrencies exhibit unique statistical and dynamic properties compared to those of traditional financial assets, making the study of their volatility crucial for portfolio managers and traders. We investigate the volatility connectedness dynamics of a representative set of eight major crypto assets. Methodologically, we decompose the measured volatility into positive and negative components and employ the time-varying parameters vector autoregression (TVP-VAR) framework to show distinct dynamics associated with market booms and downturns. Our findings indicate that crypto connectedness reflects important events and oscillates substantially while reaching lower limit values when compared to traditional financial markets. Periods of extremely high or low connectedness are clearly linked to specific events in the crypto market and macroeconomic or monetary history. Furthermore, existing asymmetry from good and bad volatility indicates that market downturns spill over substantially faster than comparable market surges. Overall, the connectedness dynamics are driven by a combination of both crypto (momentum, on-chain activity, off-chain activity) and legacy financial and economic (financial and economic uncertainty, and financial market performance) factors, while the asymmetry is more connected to the off-chain crypto activity and the combination of economic, financial, and monetary factors. In both the total connectedness and asymmetry modelling, these can serve as hands-on indicators to be further translated into specific portfolio re-balancing decisions, risk management, and regulatory frameworks.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

50206 - Finance

Project

<a href="/en/project/GA23-06606S" target="_blank" >GA23-06606S: Deep dive into decentralized finance: Market microstructure, and behavioral and psychological patterns</a><br>

Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2024

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

JOURNAL OF INTERNATIONAL FINANCIAL MARKETS, INSTITUTIONS AND MONEY

ISSN

1042-4431

e-ISSN

1873-0612

Volume of the periodical

96

Issue of the periodical within the volume

1

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

22

Pages from-to

102062

UT code for WoS article

001331621200001

EID of the result in the Scopus database

2-s2.0-85205421980