Reevaluating intermarket connectedness: The impact of Monday return calculations on cryptocurrencies and traditional assets

Abstract

• Matching trading periods and investment horizons between equities and cryptocurrencies are fundamentally challenging. • Monday returns and intermarket connectedness of cryptocurrencies notably differ when alternative benchmark (closing) prices are used. • Using inconsistent return estimation methods from different sources delivers spurious intermarket connectedness results. • THETA, GNO, GLM, ENJ, WAXP, KCS, and WAVES are most vulnerable to the return estimation method. • Seemingly inconsequential choices critically affect the main conclusions drawn by the existing studies on market interconnectedness. Cryptocurrencies trade continuously, unlike traditional assets limited to weekdays, creating challenges in calculating Monday returns. This paper investigates the impact of four benchmark closing prices—Friday, Saturday, Sunday, and a weekend average—on intermarket connectedness. Analyzing 72 cryptocurrencies (2018–2024) and their relation to the S&P500 using the TVP-VAR model, we find significant variations in economic and statistical outcomes, influencing both the magnitude and direction of spillovers. Mixed log- and non-log-based return methods yield inconsistent results for specific cryptocurrencies like THETA, GNO, GLM, and WAVES. These findings highlight the critical importance of consistent return methodologies in cryptocurrency market analysis.