Asymmetric volatility in the cryptocurrency market: New evidence from models with structural breaks

【Author】 Aharon, David Y.; Butt, Hassan Anjum; Jaffri, Ali; Nichols, Brian

【Source】INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

【影响因子】8.235

【Abstract】Previous literature shows that major cryptocurrencies exhibit inverse asymmetric volatility: positive shocks increase price volatility more than negative ones. In this study, we revisit the asymmetric volatility dynamics of major cryptocurrencies using asymmetric GARCH models that incorporate endogenously detected structural breaks. Our results show that after incorporating structural breaks, volatility persistence decreases and asymmetric volatility increases for all cryptocurrencies in this study. Thus, prior research that ignores structural breaks underestimates the impact of unexpected news on price volatility in cryptocurrency markets. We also present important economic implications of our results: ignoring structural breaks adversely affects the hedging strategies, derivatives valuations, and risk exposure measurement of investors in cryptocurrency markets.

【Keywords】Cryptocurrencies; Asymmetric volatility; Volatility persistence; Structural breaks

【发表时间】2023 MAY

【收录时间】2023-06-05

【文献类型】理论模型

【主题类别】

区块链治理-市场治理-数字货币