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

Kód výsledku v 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>

Nalezeny alternativní kódy

RIV/00216208:11230/24:10488688

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

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

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

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

Popis výsledku anglicky

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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50206 - Finance

Projekt

<a href="/cs/project/GA23-06606S" target="_blank" >GA23-06606S: Do hlubin decentralizovaných financí: Tržní mikrostruktura, behaviorální a psychologické vzorce</a><br>

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2024

Kód důvěrnosti údajů

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

Název periodika

JOURNAL OF INTERNATIONAL FINANCIAL MARKETS, INSTITUTIONS AND MONEY

ISSN

1042-4431

e-ISSN

1873-0612

Svazek periodika

96

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

22

Strana od-do

102062

Kód UT WoS článku

001331621200001

EID výsledku v databázi Scopus

2-s2.0-85205421980