The impacts of futures trading on volatility and volatility asymmetry of Bitcoin returns

【Author】 Zhang, Chuanhai; Ma, Huan; Arkorful, Gideon Bruce; Peng, Zhe

【Source】INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

【影响因子】8.235

【Abstract】The impact of Bitcoin futures introduction on the underlying Bitcoin volatility has been a controversial topic. Conflicting results had been obtained from different sample periods and methodologies. To address this debate, this study examines the impact of futures trading on volatility and volatility asymmetry of Bitcoin returns in the short and long run. Using exponential GARCH models, we introduce a dummy in the variance equation to capture the changes in the volatility after the introduction of Bitcoin futures. We find that after the introduction, spot return volatility decreases in the short run, but increases in the long run. Besides, in the short run, there exists an inverse leverage effect before and after the introduction; in the long run, the inverse leverage effect before the introduction changes to a usual level effect after the introduction. Finally, we examine whether greater futures trading activity, proxied by trading volume and open interest, is associated with greater Bitcoin volatility. To do so, we decompose each proxy into expected and unexpected components and document that, in the long run, Bitcoin volatility covaries positively with unexpected futures trading volume, but negatively with unexpected futures open interest.

【Keywords】Bitcoin; Futures-trading activity; Volatility; Asymmetry; GARCH models

【发表时间】2023 MAR

【收录时间】2023-05-09

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析