Information Transmission in the Return and Volatility between the Bitcoins and Fiat Currency Exchange Rates

Sowmya Subramaniam, Mrityunjay Tiwary

Abstract


The study analyzes the information transmission in the returns and volatility of bitcoin prices in cross market context and its impact on the fiat currency exchange rates. The information transmission in returns and volatility are captured using the spillover measure proposed by Diebold and Yilmaz (2012). The results suggest that USD denominated bitcoins drives the movement of prices to other bitcoin exchanges.  The bitcoin returns exhibit significant spillover to the currency exchange rates of JPY, EUR and PLN. However, information transmission of volatility in Bitcoins is limited on volatility of currency exchange rates. Further, there exists a regional cluster in the volatility among the bitcoin exchanges.

Keywords: Bitcoins, Currency exchange rates, Information transmission, crypto currency.


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