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Structural breaks and double long memory of cryptocurrency prices: A comparative analysis from Bitcoin and Ethereum

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  • Mensi, Walid
  • Al-Yahyaee, Khamis Hamed
  • Kang, Sang Hoon

Abstract

This study explores the impacts of structural breaks (SB) on the dual long memory levels of Bitcoin and Ethereum price returns. We identify dual long memory and structural changes on cryptocurrency markets using four different generalized autoregressive conditional heteroskedasticity models (e.g., GARCH, FIGARCH, FIAPARCH, and HYGARCH). Furthermore, the persistence level of both returns and volatility decreases after accounting for long memory and switching states. Finally, the FIGARCH model with SB variables provides a comparatively superior forecasting accuracy performance. These findings have significant implications for both cryptocurrency allocations and portfolio management.

Suggested Citation

  • Mensi, Walid & Al-Yahyaee, Khamis Hamed & Kang, Sang Hoon, 2019. "Structural breaks and double long memory of cryptocurrency prices: A comparative analysis from Bitcoin and Ethereum," Finance Research Letters, Elsevier, vol. 29(C), pages 222-230.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:222-230
    DOI: 10.1016/j.frl.2018.07.011
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    More about this item

    Keywords

    Bitcoin; Ethereum; Structural breaks; Long memory; GARCH family models;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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