Empirical evidence of extreme dependence and contagion risk between main cryptocurrencies |
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| Institution: | 1. Center for Energy and Environmental Policy Research, Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China;2. School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China;3. USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon;4. Department of Accountancy, Finance and Economics, Huddersfield Business School, University of Huddersfield, Queensgate, Huddersfield, UK;5. Energy and Sustainable Development (ESD), Montpellier Business School, Montpellier, France |
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| Abstract: | This study examines the dependence and contagion risk between Bitcoin (BTC), Litecoin (LTC) and Ripple (XRP) using non-parametric mixture copulas (developed by Zimmer, 2012) and recently proposed methods of full-range tail dependence copulas (advanced by Hua, 2017, Su and Hua, 2017), for the period from 04-08-2013 to 17-06-2018. The Chi-plots and Kendall plots results show heavy tail dependence between each pairs of the cryptocurrencies. Evidence from the mixture copula indicates that for the BTC-LTC pair the upper-tail dependence is both stronger and more prevalent, while for the other pairs of cryptocurrencies the lower-tail dependence is very strong and more prevalent. However, the results of the full-range tail dependence copulas reveal a strong and prevalent upper and lower-tail dependence of each pairs of cryptocurrencies. These results provide evidence of significant risk contagion among price returns of major cryptocurrencies, both in bull and bear markets. |
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| Keywords: | Cryptocurrencies Risk contagion Tail dependence Mixture copula Full-range tail dependence copulas |
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