Volatility and return jumps in bitcoin

Pedro Chaim () and Márcio Laurini

Economics Letters, 2018, vol. 173, issue C, 158-163

Abstract: In this article we are interested in understanding the dynamics of Bitcoin daily returns and volatility. Cryptocurrencies have very high unconditional volatility, and are subject to sudden, massive, price swings. We start with a standard log-normal stochastic volatility model, then explore two formulations which incorporate discontinuous jumps to volatility and returns. Jumps to volatility are permanent, while jumps to mean returns have contemporaneous effects only. Results point to two high volatility periods: the first from late 2013 to early 2014, likely associated to the Mt. Gox incident; the second covers the year of 2017, peaking on December — likely driven by increased popular attention. Jumps to mean returns are specially relevant to capture large price variations, mostly negative, associated with formative events in cryptocurrency markets, such as hacks and unsuccessful fork attempts.

Keywords: Bitcoin; Cryptocurrencies; Stochastic volatility; Jumps (search for similar items in EconPapers)
JEL-codes: C22 C5 G1 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (99)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176518304245
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:ecolet:v:173:y:2018:i:c:p:158-163

DOI: 10.1016/j.econlet.2018.10.011

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().