Predicting the stock prices of G7 countries with Bitcoin prices

Afees Salisu, Kazeem Isah and Lateef Akanni

No 54, Working Papers from Centre for Econometric and Allied Research, University of Ibadan

Abstract: This paper attempts to establish that some inherent features of the Bitcoin price can be exploited to produce better forecast results for stock prices. It does so by constructing predictive models for stock prices of G7 countries with symmetric and asymmetric prices of Bitcoin. The underlying statistical properties of Bitcoin prices such as persistence and conditional heteroscedasticity are captured in the estimation process using the Westerlund and Narayan (2015) estimator that allows for such effects in forecasting. There are two striking findings from the analysis. First, the results suggest that accounting for asymmetries is more likely to enhance the predictive power of Bitcoin in forecasting stock prices regardless of the data sample and forecast horizon. Secondly, the Bitcoin-based predictive model for stock prices, particularly the asymmetric variant, outperforms the Fractionally Integrated Autoregressive Moving Average (ARFIMA) model. While there are concerns as to whether the cryptocurrencies are veritable substitutes to the conventional financial assets, their close link with the developed stock exchanges such as those in the G7 countries suggests that they share some common characteristics such as news effects [asymmetries] which can be exploited when forecasting the behaviour of stock prices.

Keywords: Stock price; Bitcoin price; G7 countries; Forecast evaluation (search for similar items in EconPapers)
JEL-codes: C52 C53 G11 G14 G17 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2018-04
New Economics Papers: this item is included in nep-for and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://cear.org.ng/index.php?option=com_docman&tas ... oad&gid=97&Itemid=29 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://cear.org.ng/index.php?option=com_docman&task=doc_download&gid=97&Itemid=29 [301 Moved Permanently]--> https://cear.org.ng/index.php?option=com_docman&task=doc_download&gid=97&Itemid=29)

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:cui:wpaper:0054

Access Statistics for this paper

More papers in Working Papers from Centre for Econometric and Allied Research, University of Ibadan Contact information at EDIRC.
Bibliographic data for series maintained by Adeoye Omosebi ( this e-mail address is bad, please contact ).