 Regime switches and commonalities of the cryptocurrencies asset classGianna Figà-Talamanca, Sergio Focardi and Marco Patacca The North American Journal of Economics and Finance, 2021, vol. 57, issue C Abstract: In this paper we test for regime changes and possible regime commonalities in the price dynamics of Bitcoin, Ethereum, Litecoin and Monero, as representatives of the cryptocurrencies asset class. Several parametric models are considered for the joint dynamics of the basket price where parameters are modulated through a Hidden Markov Chain with finite state space. Best specifications within Gaussian and Autoregressive models for price differences are selected by means of the AIC and BIC information criteria and through an out-of-sample forecasting performance. The empirical results, within the period January 2016 to October 2019, suggest that three or four states may be relevant to describe the dynamics of each individual cryptocurrency, depending on the selection criteria, while the entire basket displays at most three common states. Finally, we show how the identification of appropriate models may be exploited in order to build profitable investment strategies on the considered cryptocurrencies. Keywords: Cryptocurrencies; Regime switching; Hidden Markov Models; Forecasting analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000577 DOI: 10.1016/j.najef.2021.101425 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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