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The effect of COVID-19 on long memory in returns and volatility of cryptocurrency and stock markets

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  • Lahmiri, Salim
  • Bekiros, Stelios

Abstract

We examine long memory (self-similarity) in digital currencies and international stock exchanges prior and during COVID-19 pandemic. Specifically, ARFIMA and FIGARCH models are respectively employed to evaluate long memory parameter in returns and volatility. The dataset contains 45 cryptocurrency markets and 16 international equity markets. The t-test and F-test are performed to estimated long memory parameters. The empirical findings follow. First, the level of persistence in return series of both markets has increased during the COVID-19 pandemic. Second, during COVID-19 pandemic, variability level in persistence in return series has increased in both digital currencies and stock markets. Third, return series in both markets exhibited comparable level of persistence prior and during the COVID-19 pandemic. Fourth, return series in volatility series of cryptocurrency exhibited high degree of persistence compared to international stock markets during the COVID-19 pandemic. Therefore, it is concluded that COVID-19 pandemic significantly affected long memory in return and volatility of cryptocurrency and international stock markets. In addition, our results suggest that the hybrid long memory model represented by the integration of ARFIMA-FIGARCH is significantly suitable to describe returns and volatility of cryptocurrencies and stocks and to reveal differences before and during COVID-19 pandemic periods.

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  • Lahmiri, Salim & Bekiros, Stelios, 2021. "The effect of COVID-19 on long memory in returns and volatility of cryptocurrency and stock markets," Chaos, Solitons & Fractals, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:chsofr:v:151:y:2021:i:c:s0960077921005750
    DOI: 10.1016/j.chaos.2021.111221
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    2. Lahmiri, Salim & Bekiros, Stelios & Bezzina, Frank, 2022. "Evidence of the fractal market hypothesis in European industry sectors with the use of bootstrapped wavelet leaders singularity spectrum analysis," Chaos, Solitons & Fractals, Elsevier, vol. 165(P1).
    3. Foued Sa^adaoui, 2023. "Structured Multifractal Scaling of the Principal Cryptocurrencies: Examination using a Self-Explainable Machine Learning," Papers 2304.08440, arXiv.org.
    4. Foroutan, Parisa & Lahmiri, Salim, 2022. "The effect of COVID-19 pandemic on return-volume and return-volatility relationships in cryptocurrency markets," Chaos, Solitons & Fractals, Elsevier, vol. 162(C).
    5. Galip Gençyürk, 2024. "Volatility Modeling and Spillover: The Turkish and Russian Stock Markets," Istanbul Business Research, Istanbul University Business School, vol. 53(1), pages 81-101, April.
    6. Saâdaoui, Foued, 2023. "Skewed multifractal scaling of stock markets during the COVID-19 pandemic," Chaos, Solitons & Fractals, Elsevier, vol. 170(C).
    7. He Huang & Liwei Zhong & Ting Shen & Huixin Wang, 2022. "Performance prediction and optimization for healthcare enterprises in the context of the COVID-19 pandemic: an intelligent DEA-SVM model," Journal of Combinatorial Optimization, Springer, vol. 44(5), pages 3778-3791, December.
    8. Ergemen, Yunus Emre & Haldrup, Niels & Rodríguez-Caballero, Carlos Vladimir, 2016. "Common long-range dependence in a panel of hourly Nord Pool electricity prices and loads," Energy Economics, Elsevier, vol. 60(C), pages 79-96.
    9. Öztunç Kaymak, Öznur & Kaymak, Yiğit, 2022. "Prediction of crude oil prices in COVID-19 outbreak using real data," Chaos, Solitons & Fractals, Elsevier, vol. 158(C).

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