The forking effect
Year: 2025
Type: article
Abstract: Purpose: This study introduces the concept of the forking effect , a measurable financial response to technological changes, while focusing on the impact of these events on the parent coin. Design/Methodology/Approach: We use a modified exponential GARCH framework to assess how the parent coin responds to these events in both their return dynamics and volatility structure. Findings: Our findings reveal that forks do not significantly affect the parent coin’s returns but have a strong positive impact on its volatility, especially when considering market dynamics. Our model accounts for key features like volatility clustering and fat-tailed distributions. Additionally, we observe that following a fork event, volatility remains elevated for the next three days. This heightened volatility is not amplified when multiple forks coincide on the same calendar day, suggesting that the incremental risk of overlapping fork events is negligible. Originality/Value: This paper extends the crypto-related literature by formally defining and measuring the forking effect, a subject rarely addressed in finance research. By demonstrating that forks materially elevate short-run volatility without altering expected returns, the analysis supplies investors with a clearer basis for portfolio risk management and offers regulators insights into a distinct source of market instability in Blockchain-based asset markets.
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,740
OpenAlex ID: W4417124868