Modeling the Volatility of Bitcoin Returns Using EGARCH Method

Authors : Demet Eroğlu Sevinç, Gönül Yüce Akinci

Pages : 787-800

Doi:10.19168/jyasar.861308

View : 26 | Download : 7

Publication Date : 2021-04-30

Article Type : Research

Abstract :The development process in financial markets give rise to the emergence of various financial instruments and cryptocurrencies, which are the newest tools of this process, are trying to integrate into the system. Even though the use of crypto-currencies for investment and speculation has increased, limited information on the market leads to high level of volatility in price and return. Therefore, this study aims to analyze the volatility dynamics of the returns of Bitcoin, which is the cryptocurrency with the largest market volume, using the weekly data set for 2013:04-2020:09 period. In this context, Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH) model is employed to investigate the asymmetric volatility, which refers to the asymmetric effects of positive and negative shocks. The results of the analysis show that the leverage effect applies to Bitcoin returns. In other words, the asymmetric effect between good and bad news is revealed. Moreover, the fact that the parameter of the volatility resistance has a high value reflects that the asymmetric past period shocks have a significant effect on the current period conditional variance
Keywords : Bitcoin, Asymmetric Effect, Volatility, EGARCH Model