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Can the ‘good-bad’ volatility and the leverage effect improve the prediction of cryptocurrency volatility?—Evidence from SHARV-MGJR model

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  • Chen, Zhenlong
  • Liu, Junjie
  • Hao, Xiaozhen

Abstract

In recent years, cryptocurrencies have gained investor attention for their extreme volatility, but this has introduced financial risks that require accurate prediction models. Therefore, we propose the SHARV-MGJR model, which incorporates both ‘good-bad’ volatility, leverage effects, and current return information to enhance the accuracy of cryptocurrency market volatility predictions. Empirical results demonstrate that compared to GARCH-type models, the SHARV-MGJR model exhibits superior predictive accuracy in forecasting cryptocurrency market volatility. Furthermore, robustness tests confirm the superiority of the SHARV-MGJR model in predicting cryptocurrency market volatility.

Suggested Citation

  • Chen, Zhenlong & Liu, Junjie & Hao, Xiaozhen, 2024. "Can the ‘good-bad’ volatility and the leverage effect improve the prediction of cryptocurrency volatility?—Evidence from SHARV-MGJR model," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007876
    DOI: 10.1016/j.frl.2024.105757
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    References listed on IDEAS

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    More about this item

    Keywords

    SHARV-MGJR model; Volatility forecasting; Cryptocurrency market; Leverage effect; Current return information; ‘Good-bad’ volatility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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