Persistence and volatility spillovers of Bitcoin to other leading cryptocurrencies: a BEKK-GARCH analysis

Abstract

Purpose

This paper aims to investigate the effects of volatility transmission among Bitcoin and other leading cryptocurrencies, namely, Binance USD, BNB, Cardano, Dogecoin, Ethereum, Polkadot, Polygon, Solana, Tether, USD Coin and XRP.

Design/methodology/approach

The multivariate BEKK-GARCH model is used with the daily data set from 1 January 2017 to 31 March 2023. The data set is analysed in its entirety and is also the COVID-19 epidemic period.

Findings

The study reveals that while the volatility of cryptocurrency prices is influenced by their own historical shocks and volatility, there is proof of the effects shock transmission among Bitcoin and other notable cryptocurrencies. Furthermore, the authors identify the spillover effects of volatility among all 11 pairs and provide evidence that conditional correlations with varying time constants are present, and predominantly positive for both the entire and COVID-19 outbreak periods.

Practical implications

The findings will be helpful to market experts who want to avoid losses in traditional assets. To develop the best risk management and hedging strategies, businesses might use the information to build asset portfolios or personalise payment methods. The use of such data by investors and portfolio managers could aid in the development of investment opportunities, risk insurance plans or hedging strategies for the management of financial portfolios.

Originality/value

To the best of the authors’ knowledge, the use of the BEKK-GARCH model for examining the effects of volatility spillover among Bitcoin and the other eleven top cryptocurrencies has not been previously documented.

Citation

Sinlapates, P. and Chancharat, S. (2024), "Persistence and volatility spillovers of Bitcoin to other leading cryptocurrencies: a BEKK-GARCH analysis", Foresight, Vol. 26 No. 1, pp. 84-97. https://doi.org/10.1108/FS-09-2022-0100