Could this be a fiction? Bitcoin forecasts most tradable currency pairs better than ARFIMA

Afees Salisu, Lateef Akanni and Rasheed Azeez

No 51, Working Papers from Centre for Econometric and Allied Research, University of Ibadan

Abstract: In this paper, we attempt to exploit any inherent useful information in Bitcoin to predict the future path of the most tradable currency pairs in the world. We also verify whether the forecast outcomes can compare favourably with the time series model such as the fractionally integrated autoregressive moving average (ARFIMA) model. We follow the Lewellen (2004) and Westerlund and Narayan (2102, 2015) approaches that account for any statistical effect that could bias the regression estimates. Our results suggest that Bitcoin is a good predictor of the selected currency pairs and more importantly, its forecast results outperform the time series model judging by the Diebold and Mariano test regardless of the data sample and forecast horizon. Although, recent evidence in the literature seems to suggest that the Bitcoin bubble will soon burst, its connection with the considered currency pairs may be exploited while it lasts.

Keywords: Bitcoin; Exchange rates; Forecast evaluation (search for similar items in EconPapers)
JEL-codes: F31 F37 G15 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018-03
New Economics Papers: this item is included in nep-for, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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