Time-Varying Volatility in Bitcoin Market and Information Flow at Minute-Level Frequency

Scientific paper - Original scientific paper

• Author: Irena Barjašić
• Author: Nino Antulov-Fantulin
• Author's institution: University of Zagreb; Faculty of Science; (Department of Physics)
• Scientific / art field, discipline and subdiscipline: NATURAL SCIENCES; Physics

Abstract (english)

In this article, we analyze the time series of minute price returns on the Bitcoin market through the statistical models of the generalized autoregressive conditional heteroscedasticity (GARCH) family. We combine an approach that uses historical values of returns and their volatilities—GARCH family of models, with a so-called Mixture of Distribution Hypothesis, which states that the dynamics of price returns are governed by the information flow about the market. Using time series of Bitcoin-related tweets, the Bitcoin trade volume, and the Bitcoin bid–ask spread, as external information signals, we test for improvement in volatility prediction of several GARCH model variants on a minute-level Bitcoin price time series. Statistical tests show that GARCH(1,1) and cGARCH(1,1) react the best to the addition of external signals to model the volatility process on out-of-sample data.

• Keywords (english): bitcoin; volatility; econometrics; generalized autoregressive conditional heteroscedasticity; social media
• Language: english
• Publication type: Scientific paper - Original scientific paper
• Publication status: Published
• Peer review: Peer review - international
• Publication version: Published version
• Journal title: Frontiers in Physics
• Numbering: vol. 9, 644102
• e-ISSN: 2296-424X
• DOI: https://doi.org/10.3389/fphy.2021.644102
• URN:NBN: urn:nbn:hr:217:869044
• Publication: 2021
• Project: Number: KK.01.1.1.01.0004; Title (croatian): Provedba vrhunskih istraživanja u sklopu Znanstvenog centra izvrsnosti za kvantne i kompleksne sustave te reprezentacije Liejevih algebri; Title (english): Implementation of top research within the Scientific Center of Excellence for Quantum and Complex Systems, and Representations of Lie Algebras; Acronym: QuantiXLie; Leader: Hrvoje Buljan; Jurisdiction: eu; Funding stream: European Regional Development Fund
• Document URL: https://www.frontiersin.org/articles/10.3389/fphy.2021.644102/full
• Type of resource: Text
• Access conditions: Open access
• Public note: © 2021 Barjašić and Antulov-Fantulin. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms. Received: 19 December 2020. Accepted: 30 April 2021. Published: 21 May 2021.
• Created on: 2024-09-22 19:52:27