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Detecting overreaction in the Bitcoin market: A quantile autoregression approach

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  • Chevapatrakul, Thanaset
  • Mascia, Danilo V.

Abstract

We examine the persistence of returns on Bitcoin at different parts on the return distributions through the use of the quantile autoregressive (QAR) models. We find lower quantiles of the daily return distribution and upper quantiles of the weekly return distribution to exhibit positive dependence with past returns. The evidence points to overreaction in the Bitcoin market: investors overreact during days of sharp declines in the Bitcoin price and during weeks of market rallies.

Suggested Citation

  • Chevapatrakul, Thanaset & Mascia, Danilo V., 2019. "Detecting overreaction in the Bitcoin market: A quantile autoregression approach," Finance Research Letters, Elsevier, vol. 30(C), pages 371-377.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:371-377
    DOI: 10.1016/j.frl.2018.11.004
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    Cited by:

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    2. Parthajit Kayal & Purnima Rohilla, 2021. "Bitcoin in the economics and finance literature: a survey," SN Business & Economics, Springer, vol. 1(7), pages 1-21, July.
    3. Marthinsen, John E. & Gordon, Steven R., 2022. "The price and cost of bitcoin," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 280-288.
    4. Jin, Chenglu & Lu, Xingyu & Zhang, Yihan, 2022. "Market reaction, COVID-19 pandemic and return distribution," Finance Research Letters, Elsevier, vol. 47(PB).
    5. Borgards, Oliver & Czudaj, Robert L., 2021. "Features of overreactions in the cryptocurrency market," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 31-48.
    6. Tian, Shu & Zhao, Bo & Olivares, Resi Ong, 2023. "Cybersecurity risks and central banks’ sentiment on central bank digital currency: Evidence from global cyberattacks," Finance Research Letters, Elsevier, vol. 53(C).
    7. Arun Narayanasamy & Humnath Panta & Rohit Agarwal, 2023. "Relations among Bitcoin Futures, Bitcoin Spot, Investor Attention, and Sentiment," JRFM, MDPI, vol. 16(11), pages 1-24, November.
    8. Hardy, Nicolás & Ferreira, Tiago & Quinteros, Maria J. & Magner, Nicolás S., 2023. "“Watch your tone!”: Forecasting mining industry commodity prices with financial report tone," Resources Policy, Elsevier, vol. 86(PA).
    9. John E. Marthinsen & Steven R. Gordon, 2022. "The Price and Cost of Bitcoin," Papers 2204.13102, arXiv.org.
    10. Guglielmo Maria Caporale & Alex Plastun, 2020. "Momentum effects in the cryptocurrency market after one-day abnormal returns," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 34(3), pages 251-266, September.
    11. Plastun, Alex & Sibande, Xolani & Gupta, Rangan & Ji, Qiang, 2024. "Price effects after one-day abnormal returns and crises in the stock markets," Research in International Business and Finance, Elsevier, vol. 70(PA).
    12. Ahmed, Walid M.A. & Al Mafrachi, Mustafa, 2021. "Do higher-order realized moments matter for cryptocurrency returns?," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 483-499.
    13. Borgards, Oliver & Czudaj, Robert L. & Hoang, Thi Hong Van, 2021. "Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact," Resources Policy, Elsevier, vol. 71(C).
    14. Hui, Cho-Hoi & Lo, Chi-Fai & Chau, Po-Hon & Wong, Andrew, 2020. "Does Bitcoin behave as a currency?: A standard monetary model approach," International Review of Financial Analysis, Elsevier, vol. 70(C).
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    More about this item

    Keywords

    Bitcoin; Cryptocurrencies; Quantile regression; Overreaction;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G00 - Financial Economics - - General - - - General

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