A Simple Approach to Assess if a Financial ¡°Bubble¡± is Present: The Case of Bitcoin
Vitor M. A. da Fonseca and
Manuel A. R. da Fonseca
Applied Economics and Finance, 2019, vol. 6, issue 4, 1-10
This article¡¯s goal is to evaluate if the recent price behavior of Bitcoin can be characterized as a financial market ¡°bubble¡±. To deal with this assessment, we adopt a statistical definition of a ¡°bubble¡± derived from the efficient market hypothesis and we propose a simple method to test this proposition, based on the time-series model known as random walk. We analyze the data available for Bitcoin prices, together with an asset selected as benchmark, and perform statistical tests derived from simple regression equations. The main conclusion is that there is consistent evidence that that Bitcoin follows the pattern of a financial ¡°bubble¡± ¨C at least, such pattern is more evident in the case of Bitcoin than in the stock index used as benchmark.
Keywords: Bitcoin; ¡°bubbles¡± in financial markets; time series models; statistical regression analysis (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:rfa:aefjnl:v:6:y:2019:i:4:p:1-10
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