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Academic Journal of Business & Management, 2023, 5(2); doi: 10.25236/AJBM.2023.050218.

Investor-Induced Cryptocurrency Contagion Channels: An Empirical Evidence from Five Major Economies

Author(s)

Yatao Wang

Corresponding Author:
Yatao Wang
Affiliation(s)

Economics and Management School, Xi’an University of Posts and Telecommunications, Xi’an, China

Abstract

Coupled with the global pandemic and hyperinflation, the innovation risks of cryptocurrency have led to significant price volatility. There is a significant effect of cryptocurrencies on traditional financial markets and contagion channels. Therefore, regulatory authorities should understand the contagion channels to analyze the input risks and take necessary measures. This paper adopts the copula model to study the contagion channels of cryptocurrencies in five major economies. Additionally, three hypotheses are tested to determine whether investor induction serves as the main contagion channel. The empirical results indicate that cryptocurrency market contagion is significant in all five economies, with "portfolio rebalancing" as an important channel of transmission. Moreover, some countries represent time-varying contagion channels. Lastly, cryptocurrencies are not only an indirect symbol of the country’s integration into the global economy but also a risk indicator for new assets.

Keywords

Cryptocurrency regulation; Contagion channels; Portfolio rebalancing; Copula model

Cite This Paper

Yatao Wang. Investor-Induced Cryptocurrency Contagion Channels: An Empirical Evidence from Five Major Economies. Academic Journal of Business & Management (2023) Vol. 5, Issue 2: 121-128. https://doi.org/10.25236/AJBM.2023.050218.

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