TY - JOUR
T1 - Volatility persistence in cryptocurrency markets under structural breaks
AU - Abakah, Emmanuel Joel Aikins
AU - Gil-Alana, Luis Alberiko
AU - Madigu, Godfrey
AU - Romero-Rojo, Fatima
N1 - Publisher Copyright:
© 2020 Elsevier Inc.
PY - 2020/9
Y1 - 2020/9
N2 - This paper deals with the analysis of volatility persistence in 12 main cryptocurrencies (Bitcoin, Bitshare, Bytecoin, Dash, Ether, Litecoin, Monero, Nem, Ripple, Siacoin, Stellar and Tether) taking into account the possibility of structural breaks. Using fractional integration methods, the results indicate that both absolute and squared returns display long memory features, with orders of integration confirming the long memory hypothesis. However, after accounting for structural breaks, we find a reduction in the degree of persistence in the cryptocurrency market. The evidence of persistence in volatility imply that market participants who want to make gains across trading scales need to factor the persistence properties of cryptocurrencies in their valuation and forecasting models since that will help improve long-term volatility market forecasts and optimal hedging decisions.
AB - This paper deals with the analysis of volatility persistence in 12 main cryptocurrencies (Bitcoin, Bitshare, Bytecoin, Dash, Ether, Litecoin, Monero, Nem, Ripple, Siacoin, Stellar and Tether) taking into account the possibility of structural breaks. Using fractional integration methods, the results indicate that both absolute and squared returns display long memory features, with orders of integration confirming the long memory hypothesis. However, after accounting for structural breaks, we find a reduction in the degree of persistence in the cryptocurrency market. The evidence of persistence in volatility imply that market participants who want to make gains across trading scales need to factor the persistence properties of cryptocurrencies in their valuation and forecasting models since that will help improve long-term volatility market forecasts and optimal hedging decisions.
KW - Cryptocurrencies
KW - Fractional integration
KW - Long memory
KW - Volatility
UR - http://www.scopus.com/inward/record.url?scp=85089014135&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2020.06.035
DO - 10.1016/j.iref.2020.06.035
M3 - Article
AN - SCOPUS:85089014135
SN - 1059-0560
VL - 69
SP - 680
EP - 691
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -