Forecasting cryptocurrency volatility

Leopoldo Catania and Stefano Grassi

International Journal of Forecasting, 2022, vol. 38, issue 3, 878-894

Abstract: This paper studies the behavior of cryptocurrencies’ financial time series, of which Bitcoin is the most prominent example. The dynamics of these series are quite complex, displaying extreme observations, asymmetries, and several nonlinear characteristics that are difficult to model and forecast. We develop a new dynamic model that is able to account for long memory and asymmetries in the volatility process, as well as for the presence of time-varying skewness and kurtosis. The empirical application, carried out on 606 cryptocurrencies, indicates that a robust filter for the volatility of cryptocurrencies is strongly required. Forecasting results show that the inclusion of time-varying skewness systematically improves volatility, density, and quantile predictions at different horizons.

Keywords: Cryptocurrency; Bitcoin; Score-driven model; Density prediction; Volatility prediction; Leverage effect; Long memory; Higher-order moments (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169207021001059
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:intfor:v:38:y:2022:i:3:p:878-894

DOI: 10.1016/j.ijforecast.2021.06.005

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().