Price dynamics and speculative trading in bitcoin
TL;DR: In this paper, the authors examined the price dynamics of Bitcoin and found that speculative trading is not directly associated with Bitcoin's unusual level of volatility, nor did speculative trading contribute to the unprecedented rise and subsequent crash in Bitcoin's value.
About: This article is published in Research in International Business and Finance.The article was published on 2017-10-01. It has received 253 citations till now. The article focuses on the topics: Digital currency.
Citations
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TL;DR: In this article, the authors analyse the relationship between three popular cryptocurrencies and a variety of other financial assets and find evidence of the relative isolation of these assets from the financial and economic assets.
813 citations
TL;DR: A systematic review of the empirical literature based on the major topics that have been associated with the market for cryptocurrencies since their development as a financial asset in 2009 is presented in this article, where the authors provide a systematic analysis of the main topics that influence the perception of cryptocurrencies as a credible investment asset class and legitimate of value.
623 citations
Cites background from "Price dynamics and speculative trad..."
...Böhme et al. [2015], while focusing on the governance of Bitcoin note that although its design originally set out to provide a service, new constituent are now being added but it is not clear if they aspire to meet prevailing requirements....
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TL;DR: In this paper, the authors compared the conditional variance properties of Bitcoin and gold as well as other assets and found differences in their structure and concluded that Bitcoin and Gold feature fundamentally different properties as assets and linkages to equity markets.
520 citations
Cites background from "Price dynamics and speculative trad..."
...According to Blau (2017), the high volatility of Bitcoin until 2014 is not related to speculative trading....
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TL;DR: In this paper, the authors revisited the informational efficiency of the Bitcoin market and analyzed the time-varying behavior of long memory of returns on Bitcoin and volatility 2011 until 2017, using the Hurst exponent.
455 citations
Cites background from "Price dynamics and speculative trad..."
...Volatility analysis is particularly important, because, as studied by Blau (2017) speculative trading was not responsible for the high volatility of Bitcoin during the period 2010-2014....
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TL;DR: This paper examined the existence and dates of pricing bubbles in Bitcoin and Ethereum, two popular cryptocurrencies using the (Phillips et al., 2011) methodology and concluded that Bitcoin is almost certainly in a bubble phase.
386 citations
References
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TL;DR: In this article, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) processes are introduced, which are mean zero, serially uncorrelated processes with nonconstant variances conditional on the past, but constant unconditional variances.
Abstract: Traditional econometric models assume a constant one-period forecast variance. To generalize this implausible assumption, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) processes are introduced in this paper. These are mean zero, serially uncorrelated processes with nonconstant variances conditional on the past, but constant unconditional variances. For such processes, the recent past gives information about the one-period forecast variance. A regression model is then introduced with disturbances following an ARCH process. Maximum likelihood estimators are described and a simple scoring iteration formulated. Ordinary least squares maintains its optimality properties in this set-up, but maximum likelihood is more efficient. The relative efficiency is calculated and can be infinite. To test whether the disturbances follow an ARCH process, the Lagrange multiplier procedure is employed. The test is based simply on the autocorrelation of the squared OLS residuals. This model is used to estimate the means and variances of inflation in the U.K. The ARCH effect is found to be significant and the estimated variances increase substantially during the chaotic seventies.
20,728 citations
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
Abstract: This paper describes a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction. It also establishes consistency of the estimated covariance matrix under fairly general conditions.
18,117 citations
"Price dynamics and speculative trad..." refers methods in this paper
...These results are robust to univariate tests and multivariate tests that use GMM with controls for Newey and West (1987) standard errors....
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TL;DR: In this paper, a natural generalization of the ARCH (Autoregressive Conditional Heteroskedastic) process introduced in 1982 to allow for past conditional variances in the current conditional variance equation is proposed.
17,555 citations
TL;DR: In this paper, a new parameterization of the multivariate ARCH process is proposed and equivalence relations are discussed for the various ARCH parameterizations, and conditions suffcient to guarantee the positive deffniteness of the covariance matrices are developed.
Abstract: This paper presents theoretical results in the formulation and estimation of multivariate gen- eralized ARCH models within simultaneous equations systems. A new parameterization of the multivariate ARCH process is proposed and equivalence relations are discussed for the various ARCH parameterizations. Constraints suffcient to guarantee the positive deffniteness of the con- ditional covariance matrices are developed, and necessary and suffcient conditions for covariance stationarity are presented. Identifcation and maximum likelihood estimation of the parameters in the simultaneous equations context are also covered.
4,413 citations
"Price dynamics and speculative trad..." refers background in this paper
...See, for example, Engle (1982), Bollerslev (1986), and Engle and Kroner (1995)....
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TL;DR: In this paper, the authors explore the implications of a market with restricted short selling in which investors have differing estimates of the returns from investing in a risky security, and explain the very low returns on the stocks in the highest risk classes, the poor long run results on new issues of stocks, the presence of discounts from net value for closed end investment companies, and the lower than predicted rates of return for stocks with high systematic risk.
Abstract: THE THEORY OF investor behavior in a world of uncertainty has been set out by several writers including Sharpe (1964) and Lintner (Feb. 1965). A key assumption of the now standard capital asset model is what Sharpe calls homothetic expectations. All investors are assumed to have identical estimates of the expected return and probability distribution of return from all securities. However, it is implausible to assume that although the future is very uncertain, and forecasts are very difficult to make, that somehow everyone makes identical estimates of the return and risk from every security. In practice, the very concept of uncertainty implies that reasonable men may differ in their forecasts. This paper will explore some of the implications of a market with restricted short selling in which investors have differing estimates of the returns from investing in a risky security.' Explanations will be offered for the very low returns on the stocks in the highest risk classes, the poor long run results on new issues of stocks, the presence of discounts from net value for closed end investment companies, and the lower than predicted rates of return for stocks with high systematic risk.
3,436 citations