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Jump-Robust Realized-GARCH-MIDAS-X Estimators for Bitcoin and Ethereum Volatility Indices

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  • Julien Chevallier

    (Economics Department, Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint-Denis, France)

  • Bilel Sanhaji

    (Economics Department, Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint-Denis, France)

Abstract

In this paper, we conducted an empirical investigation of the realized volatility of cryptocurrencies using an econometric approach. This work’s two main characteristics are: (i) the realized volatility to be forecast filters jumps, and (ii) the benefit of using various historical/implied volatility indices from brokers as exogenous variables was explicitly considered. We feature a jump-robust extension of the REGARCH-MIDAS-X model incorporating realized beta GARCH processes and MIDAS filters with monthly, daily, and hourly components. First, we estimated six jump-robust estimators of realized volatility for Bitcoin and Ethereum that were retained as the dependent variable. Second, we inserted ten Bitcoin and Ethereum volatility indices gathered from various exchanges as an exogenous variable, each at a time. Third, we explored their forecasting ability based on the MSE and QLIKE statistics. Our sample spanned the period from May 2018 to January 2023. The main result featured the best predictors among the volatility indices for Bitcoin and Ethereum derived from 30-day implied volatility. The significance of the findings could mostly be attributable to the ability of our new model to incorporate financial and technological variables directly into the specification of the Bitcoin and Ethereum volatility dynamics.

Suggested Citation

  • Julien Chevallier & Bilel Sanhaji, 2023. "Jump-Robust Realized-GARCH-MIDAS-X Estimators for Bitcoin and Ethereum Volatility Indices," Stats, MDPI, vol. 6(4), pages 1-32, December.
    • Handle: RePEc:gam:jstats:v:6:y:2023:i:4:p:82-1370:d:1298480
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