Correlations among cryptocurrencies: Evidence from multivariate factor stochastic volatility model


Shi Y., Tiwari A. K. , GÖZGÖR G., Lu Z.

RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE, vol.53, 2020 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 53
  • Publication Date: 2020
  • Doi Number: 10.1016/j.ribaf.2020.101231
  • Journal Name: RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
  • Journal Indexes: Social Sciences Citation Index, Scopus, EconLit
  • Keywords: Price volatility of cryptocurrencies, Bitcoin, Ethereum, Factor stochastic volatility model, Bayesian estimations, Multivariate time-varying approach, BITCOIN, GARCH, HEDGE, GOLD

Abstract

This paper is the first study to apply the multivariate factor stochastic volatility model (MFSVM) for analyzing the correlations among six cryptocurrencies. We use MFSVM with the Bayesian estimation procedure for the period from August 8, 2015, to January 1, 2020. According to the findings, there is a significant positive correlation between price volatility values of Bitcoin and Litecoin. Besides, the volatility values of Ethereum have a positive correlation with both Ripple and Stellar. There is also a positive correlation between the volatility values of Ripple and Dash. These findings are robust to consider different correlation networks. The evidence implies that Bitcoin is mainly related to Litecoin, but Ethereum is associated with other cryptocurrencies.