Quantifying the spillover effect in the cryptocurrency market

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Abstract

The study quantifies the spillover effects in the cryptocurrency market using a rolling-window Bayesian Vector Autoregressive Model. The present study offers a better understanding of the interconnectedness and the shock transmission in the cryptocurrency market, as it quantifies spillover risk at the pairwise directional level, offering a dynamic understanding of the shock fluctuation within the market which in turn uncovers periods of risk integration. In addition, the study investigates the determinants of the spillover shocks in the cryptocurrency market, revealing the increasing connections to external drivers over time.