Abstract:
Cryptocurrencies are generating increasing interest with concerns about various economic and financial implications. Investors in cryptocurrencies are affected by the massive jumps and crashes in the market and it is of interest to portfolio managers to answer the following question: Does investing in Bitcoin and its forks offer diversification for investors? This paper aims to answer this question by examining the relationship between the returns of Bitcoin and the returns of its forks and their associated volatilities. Our sample covers the period between 2010 and 2017 and includes Bitcoin and the portfolio of its forks. Our results, based on Dynamic GARCH model, indicate that there is a positive relation between the returns of Bitcoin and the returns of its forks. In addition, the results also show a positive relation between the volatility of Bitcoin and its forks. Finally, we found both the news effect and memory effect are significant. © 2023, EEA.
