Estimating the volatility of cryptocurrencies during bearish markets by employing GARCH models

Abstract

This study examines the volatility of certain cryptocurrencies and how they are influenced by the three highest capitalization digital currencies, namely the Bitcoin, the Ethereum and the Ripple. We use daily data for the period 1 January 2018–16 September 2018, which represents the bearish market of cryptocurrencies. The impact of the decline of these three cryptocurrencies on the returns of the other virtual currencies is examined with models of the ARCH and GARCH family, as well as the DCC-GARCH. The main conclusion of the study is that the majority of cryptocurrencies are complementary with Bitcoin, Ethereum and Ripple and that no hedging abilities exist among principal digital currencies in distressed times. © 2019 The Author(s)