Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data

Mensi, Walid; Ur-Rehman, Mobeen; Vo, Xuan Vinh; Kang, Sang Hoon

Abstract

This study examines the nonlinear multiscale relationships and spillovers among the main cryptocurrencies (Bitcoin, Bitcoin cash, Ethereum, Litecoin, DASH, Ripple, and Monero) using spillover index methodology and wavelet approaches to hourly and daily price data. The results provide evidences of dynamic spillovers among cryptocurrencies. News releases influence the instability of spillovers. Monero is the largest transmitter of risk, and Ethereum is the largest receiver of risk from other markets. Monero and Ripple are net contributors of spillovers, whereas Bitcoin, DASH, Ethereum, and Litecoin are net receivers of spillovers. The correlation ranks for different scales show that the correlations increase with scale, indicating higher diversification benefits at low scales. A mixed portfolio composed of Bitcoin and other cryptocurrencies offers advantages over individual Bitcoin portfolios, particularly on a lower scale. Finally, the optimal portfolio weight shows that cryptocurrencies should hold more BTC than other cryptocurrencies.

Citation

Mensi, W., Ur-Rehman, M., Vo, X. V., & Kang, S. H. (2024). Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data. Economic Analysis and Policy, 82, 449-479. https://doi.org/10.1016/j.eap.2024.03.021

• Journal Article Type: Article
• Acceptance Date: Mar 21, 2024
• Online Publication Date: Mar 24, 2024
• Publication Date: 2024-06
• Deposit Date: Jul 9, 2024
• Journal: Economic Analysis and Policy
• Print ISSN: 0313-5926
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 82
• Pages: 449-479
• DOI: https://doi.org/10.1016/j.eap.2024.03.021
• Keywords: Cryptocurrency; Spillover; Hedging; High frequency; Wavelet
• Public URL: https://keele-repository.worktribe.com/output/873979
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0313592624000766?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: Spillovers and multiscale relationships among cryptocurrencies: A portfolio implication using high frequency data; Journal Title: Economic Analysis and Policy; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.eap.2024.03.021; Content Type: article; Copyright: © 2024 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland.