Cryptocurrency spillovers and correlations: Inefficiency and co-movement

Key researcher

• DG Baur
• Trung Lai Hoang

Description

This paper uses a novel econometric framework to dissect connectedness into spillovers and correlations. The results based on a sample of the largest cryptocurrencies show that spillovers play a small role relative to correlations. This finding implies that the crypto market is highly efficient, as information is processed quickly, and minimal lagged information giving and receiving occurs. Tether stands out for its relatively high auto-spillovers, emphasising its special role as a stablecoin. We also find increased correlations during the COVID-19 outbreak, consistent with financial contagion, but no significant increase in spillovers.