On Cointegration and Cryptocurrency Dynamics

Arbeitspapier

This paper aims to model the joint dynamics of cryptocurrencies in a nonstationary setting. In particular, we analyze the role of cointegration relationships within a large system of cryptocurrencies in a vector error correction model (VECM) framework. To enable analysis in a dynamic setting, we propose the COINtensity VECM, a nonlinear VECM specification accounting for a varying systemwide cointegration exposure. Our results show that cryptocurrencies are indeed cointegrated with a cointegration rank of four. We also find that all currencies are affected by these long term equilibrium relations. A simple statistical arbitrage trading strategy is proposed showing a great in-sample performance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IRTG 1792 Discussion Paper ; No. 2020-012

Classification and Topics

• Classification: Wirtschaft ; Mathematical and Quantitative Methods: General
• Subject: Cointegration ; VECM ; Nonstationarity ; Cryptocurrencies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Keilbar, Georg ; Zhang, Yanfen
• Event: Veröffentlichung
• (who): Humboldt-Universität zu Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"
• (where): Berlin
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/230818
• Last update: 10.03.2025, 11:44 AM CET