The COVID-19 pandemic, volatility, and trading behavior in the bitcoin futures market

Beum Jo Park ()

Research in International Business and Finance, 2022, vol. 59, issue C

Abstract: This paper contributes to the literature on the coronavirus (COVID-19) pandemic impacts on the Bitcoin futures (BTCF) market and to the ongoing consideration of the dynamic relationship between volatility (or returns) and trading behavior variables, such as volume and open interest as a proxy for belief dispersion. This paper focuses on the role of the unprecedented market stress induced by the COVID-19 pandemic in the interrelations among the variables. Accordingly, this paper proposes a structural change (SC)-VAR-MGARCH model and finds the COVID-19 pandemic has initiated a significant regime change. Furthermore, the relationship between the variables in the pre-pandemic regime is notably unclear, whereas an increase in belief dispersion in the pandemic regime due to market stress reduces BTCF returns but raises trading volume and volatility evidently. The outcomes in the pandemic regime are remarkably consistent with the difference of opinions model, though existing evidence on the dynamic relations is ambiguous. Moreover, the outcomes support our hypothesis that, in addition to information flows, market stress causing traders’ behavioral biases should be considered as one of the crucial factors of tremendous price variability.

Keywords: The COVID-19 pandemic; Returns volatility; Trading behavior; Volume; Open interest; Belief dispersion; Market stress; Bitcoin futures market (search for similar items in EconPapers)
JEL-codes: C50 G12 G40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531921001409
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:59:y:2022:i:c:s0275531921001409

DOI: 10.1016/j.ribaf.2021.101519

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().