Volatility Spillover Effects in Leading Cryptocurrencies: A BEKK-MGARCH Analysis

Abstract

Through the application of three pair-wise bivariate BEKK models, this paper examines the conditional volatility dynamics along with interlinkages and conditional correlations between three pairs of cryptocurrencies, namely Bitcoin, Ether and Litecoin. While cryptocurrency price volatility is found to be dependent on its own past shocks and past volatility, we find evidence of bi-directional shock transmission effects between Bitcoin and both Ether and Litecoin, and uni-directional shock spillovers from Litecoin to Ether. Finally, we identify bi-directional volatility spillover effects between all the three pairs provide evidence that time-varying conditional correlations exist and are mostly positive.

Keywords: Bitcoin; Ether; Litecoin; Volatility Spillovers; BEKK-MGARCH

JEL Classification: C5; C32; G1