Modelling the lead-lag relationship between leading cryptocurrencies using BEKK-MGARCH model

Abstract

This study examines the lead-lag relationships among leading cryptocurrencies, i.e., Bitcoin, Ethereum, BNB, and Tether. The study analyses cryptocurrency daily prices from August 7, 2015, to July 31, 2022. The Granger causality test indicated a one-way causal relationship between BNB and Ethereum. Bitcoin is bi-directionally related with BNB and Ethereum. However, Tether did not correlate with Bitcoin, BNB or Ethereum. In addition, the GARCH and BEKK-MGARCH models showed two-way shock transmission effects and volatility linkages among these cryptocurrencies. This research deepens the understanding of financial markets and provides investors, regulators, and policymakers with valuable insights. Moreover, this research facilitates stakeholders in achieving optimal portfolio returns by analysing the price relationship and evaluating the capacity of cryptocurrencies to serve as price leaders to one another.