Causality-in-mean and causality-in-variance among Bitcoin, Litecoin, and Ethereum

This study aims to examine the volatility spillovers between Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH) as they are related to structural breaks.

This study examines the daily period from August 7, 2015 to July 10, 2018 by conducting causality-in-mean and causality-in-variance tests among cryptocurrencies.

The findings showed that there was one-way causality-in-mean from BTC to LTC and ETH, but there was no causality-in-mean from LTC and ETH to BTC. On the other hand, considering the structural breaks included in the variance equations, the estimation results showed that there were short-term causality-in-variance from LTC to BTC and long-term causality-in-variance from BTC to LTC.

This study fills the gap by contributing in two ways. First, to the best of the authors’ knowledge, this is the first study that used the cross-correlation function (CCF) of causality to explore causality-in-variance among cryptocurrencies. Second, this study considers the structural breaks in variance in the return series.