Estimating the volatility of Bitcoin using GARCH models

Samuel Gyamerah ()

Papers from arXiv.org

Abstract: In this paper, an application of three GARCH-type models (sGARCH, iGARCH, and tGARCH) with Student t-distribution, Generalized Error distribution (GED), and Normal Inverse Gaussian (NIG) distribution are examined. The new development allows for the modeling of volatility clustering effects, the leptokurtic and the skewed distributions in the return series of Bitcoin. Comparative to the two distributions, the normal inverse Gaussian distribution captured adequately the fat tails and skewness in all the GARCH type models. The tGARCH model was the best model as it described the asymmetric occurrence of shocks in the Bitcoin market. That is, the response of investors to the same amount of good and bad news are distinct. From the empirical results, it can be concluded that tGARCH-NIG was the best model to estimate the volatility in the return series of Bitcoin. Generally, it would be optimal to use the NIG distribution in GARCH type models since time series of most cryptocurrency are leptokurtic.

Date: 2019-09, Revised 2019-10
New Economics Papers: this item is included in nep-ets and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1909.04903 Latest version (application/pdf)

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:arx:papers:1909.04903

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().