IDEAS home Printed from https://ideas.repec.org/a/aic/saebjn/v70y2023i1p1-15n4.html
   My bibliography  Save this article

Testing the Price Bubbles in Cryptocurrencies using Sequential Augmented Dickey-Fuller (SADF) Test Procedures: A Comparison for Before and After COVID-19

Author

Listed:
  • Ali Çelik

    (Istanbul Gelisim University)

  • ÇaÄŸrı Ulu

    (Ä°zmir Kavram Vocational School)

Abstract

Bubbles in asset prices have attracted the attention of economists for centuries. Extreme increases in asset prices, followed by their sudden decline, create a turbulent effect on the economy and even invite crises in time. For this reason, some measurement techniques have been employed to investigate the price bubbles that may occur. This study explores the possible speculative price bubbles of Bitcoin, Ethereum, and Binance Coin cryptocurrencies, compares them with the pre-and post-COVID-19 period, and examines asymmetric causality relationships between variables. Therefore, we analyzed the price bubbles of these cryptocurrencies using the closing price for daily data between 16.01.2018 and 31.12.2021 by the Supremum Augmented Dickey-Fuller (SADF) and the Hatemi-J (2012) asymmetric causality test. In this context, 1446 observations, 723 of which were before COVID-19 and 723 after COVID-19, were employed in the study. Looking at the SADF analysis results, we detected 103 price bubbles before COVID-19 for the three cryptocurrencies, while we determined 599 price bubbles after COVID-19. The common finding in the asymmetric causality test results is that there is a causality relationship between the negative shocks faced by one cryptocurrency and the positive shocks faced by the other cryptocurrencies.

Suggested Citation

  • Ali Çelik & ÇaÄŸrı Ulu, 2023. "Testing the Price Bubbles in Cryptocurrencies using Sequential Augmented Dickey-Fuller (SADF) Test Procedures: A Comparison for Before and After COVID-19," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 70(1), pages 1-15, March.
    • Handle: RePEc:aic:saebjn:v:70:y:2023:i:1:p:1-15:n:4
    as

    Download full text from publisher

    File URL: http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1648
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mensi, Walid & Sensoy, Ahmet & Aslan, Aylin & Kang, Sang Hoon, 2019. "High-frequency asymmetric volatility connectedness between Bitcoin and major precious metals markets," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    2. Alexander Ljungqvist & William J. Wilhelm, 2003. "IPO Pricing in the Dot‐com Bubble," Journal of Finance, American Finance Association, vol. 58(2), pages 723-752, April.
    3. Bala Arshanapalli & William Nelson, 2016. "Testing For Stock Price Bubbles: A Review Of Econometric Tools," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 10(4), pages 29-42.
    4. Daniel Ogachi & Paul Mugambi & Lydia Bares & Zoltan Zeman, 2021. "Idiosyncrasies of Money: 21st Century Evolution of Money," Economies, MDPI, vol. 9(1), pages 1-19, March.
    5. Christopher Mayer, 2011. "Housing Bubbles: A Survey," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 559-577, September.
    6. Eli Ofek & Matthew Richardson, 2003. "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance, American Finance Association, vol. 58(3), pages 1113-1137, June.
    7. Mokni, Khaled & Ajmi, Ahdi Noomen, 2021. "Cryptocurrencies vs. US dollar: Evidence from causality in quantiles analysis," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 238-252.
    8. Yizhi Wang & Florian Horky & Lennart J. Baals & Brian M. Lucey & Samuel A. Vigne, 2022. "Bubbles all the way down? Detecting and date-stamping bubble behaviours in NFT and DeFi markets," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 20(4), pages 415-436, October.
    9. Earl Thompson, 2007. "The tulipmania: Fact or artifact?," Public Choice, Springer, vol. 130(1), pages 99-114, January.
    10. repec:bla:jfinan:v:58:y:2003:i:3:p:1113-1138 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Quinn, William & Turner, John D., 2020. "Bubbles in history," QUCEH Working Paper Series 2020-07, Queen's University Belfast, Queen's University Centre for Economic History.
    2. Goergen, Marc & Khurshed, Arif & Renneboog, Luc, 2009. "Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets," International Review of Law and Economics, Elsevier, vol. 29(3), pages 260-271, September.
    3. repec:spo:wpmain:info:hdl:2441/3tjqcugffh9i1qqufo79qh86il is not listed on IDEAS
    4. Lubos Pastor & Pietro Veronesi, 2003. "Stock Prices and IPO Waves," NBER Working Papers 9858, National Bureau of Economic Research, Inc.
    5. Gonzalez, Laura & James, Christopher, 2007. "Banks and bubbles: How good are bankers at spotting winners?," Journal of Financial Economics, Elsevier, vol. 86(1), pages 40-70, October.
    6. Switzer, Lorne N. & El Meslmani, Nabil & Zhai, Xinkai, 2022. "IPO performance and the size effect: Evidence for the US and Canada," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    7. Pastor, Lubos & Veronesi, Pietro, 2006. "Was there a Nasdaq bubble in the late 1990s?," Journal of Financial Economics, Elsevier, vol. 81(1), pages 61-100, July.
    8. Benveniste, Lawrence M. & Fu, Huijing & Seguin, Paul J. & Yu, Xiaoyun, 2008. "On the anticipation of IPO underpricing: Evidence from equity carve-outs," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 614-629, December.
    9. Vuillemey, Guillaume & Wasmer, Etienne, 2020. "Frictional unemployment with stochastic bubbles," European Economic Review, Elsevier, vol. 122(C).
    10. Richard J. Kish & Nandkumar Nayar & Wenlong Weng, 2012. "IPO pricing: a case of short-sale restrictions and divergent expectations," Quantitative Finance, Taylor & Francis Journals, vol. 12(9), pages 1439-1451, November.
    11. Chiou, Wan-Jiun Paul & Knewtson, Heather S. & Nofsinger, John R., 2019. "Paying attention to social media stocks," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 106-119.
    12. DeFusco, Anthony A. & Nathanson, Charles G. & Zwick, Eric, 2022. "Speculative dynamics of prices and volume," Journal of Financial Economics, Elsevier, vol. 146(1), pages 205-229.
    13. Bradley, Daniel J. & Gonas, John S. & Highfield, Michael J. & Roskelley, Kenneth D., 2009. "An examination of IPO secondary market returns," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 316-330, June.
    14. Cremers, Martijn & Yan, Hongjun, 2016. "Uncertainty and Valuations," Critical Finance Review, now publishers, vol. 5(1), pages 85-128, May.
    15. Guillaume Vuillemey & Etienne Wasmer, 2016. "Frictional Unemployment and Stochastic Bubbles," SciencePo Working papers Main hal-03393187, HAL.
    16. Boulton, Thomas J. & Smart, Scott B. & Zutter, Chad J., 2020. "Worldwide short selling regulations and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 62(C).
    17. Sanjeev Dewan & Fei Ren, 2007. "Risk and Return of Information Technology Initiatives: Evidence from Electronic Commerce Announcements," Information Systems Research, INFORMS, vol. 18(4), pages 370-394, December.
    18. Kanagaretnam, Kiridaran & Lee, Jimmy & Lim, Chee Yeow & Lobo, Gerald J., 2022. "Trusting the stock market: Further evidence from IPOs around the world," Journal of Banking & Finance, Elsevier, vol. 142(C).
    19. Guillaume Vuillemey & Etienne Wasmer, 2016. "Frictional Unemployment and Stochastic Bubbles," SciencePo Working papers hal-03393187, HAL.
    20. Cremers, Martijn & Yan, Hongjun, 2016. "Uncertainty and Valuations," Critical Finance Review, now publishers, vol. 5(1), pages 85-128, May.
    21. Ranganathan, Kavitha & Veeraraghavan, Madhu, 2023. "Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:saebjn:v:70:y:2023:i:1:p:1-15:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sireteanu Napoleon-Alexandru (email available below). General contact details of provider: https://edirc.repec.org/data/feaicro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.