Testing for Bubbles in Cryptocurrencies with Time-Varying Volatility
By Christian M. Hafner. Journal of Financial Econometrics, 2018
116 citations recorded by the source corpus.
The recent evolution of cryptocurrencies has been characterized by bubble-like behavior and extreme volatility. While it is difficult to assess an intrinsic value to a specific cryptocurrency, one can employ recently proposed bubble tests that rely on recursive applications of classical unit root tests. This paper extends this approach to the case where volatility is time varying, assuming a deterministic long-run component that may take into account a decrease of unconditional volatility when the cryptocurrency matures with a higher market dissemination. Volatility also includes a stochastic short-run component to capture volatility clustering. The wild bootstrap is shown to correctly adjust the size properties of the bubble test, which retains good power properties. In an empirical application using eleven of the largest cryptocurrencies and the CRIX index, the general evidence in favor of bubbles is confirmed, but much less pronounced than under constant volatility.
Subfields: Condensed Matter Physics, Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/b30a1cc2a61e3435c53a1173f4b9a7f1daec8aa7
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Condensed Matter Physics
In Economics and Econometrics
In Finance
Citations in the corpus
- Regime changes in Bitcoin GARCH volatility dynamics (2019, unknown): “Despite its anonymity and reduction in transaction costs (see Kim, 2017), Glaser et al. (2014) and Baek and Elbeck (2015) show that Bitcoin is mostly used for speculative purposes, causing extreme volatility and bubbles (see also Dyhrberg, 2016; Cheah and Fry, 2015; Hafner, 2018).”
- Bitcoin price and its marginal cost of production: support for a fundamental value (2018, background): “Bubbles in the Bitcoin market have been explored in-depth elsewhere (e.g. Garcia et al. 2014; Cheah and Fry 2015; Li et al. 2018; Hafner 2018).”