This paper examines mean and volatility spillovers between three major cryptocurrencies (Bitcoin, Litecoin and Ethereum) and the role played by cyber-attacks. Specifically, trivariate GARCH-BEKK models are estimated which include suitably defined dummies corresponding to different types, targets and number per day of cyber-attacks. Significant dynamic linkages (interdependence) between the three cryptocurrencies under investigation are found in most cases when cyber-attacks are taken into account, Bitcoin appearing to be the dominant cryptocurrency. Further, Wald tests for parameter shifts during episodes of turbulence resulting from cyber-attacks provide evidence that the latter affect the transmission mechanism between cryptocurrency returns and volatilities (contagion). More precisely, cyber-attacks appear to strengthen cross-market linkages, thereby reducing portfolio diversification opportunities for cryptocurrency investors. Finally, the conditional correlation analysis confirms the previous findings.
|Journal||Journal of International Financial Markets, Institutions and Money|
|Publication status||Published - 2021|