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How is price explosivity triggered in the cryptocurrency markets?

Author

Listed:
  • Yuzhi Cai

    (Swansea University)

  • Thanaset Chevapatrakul

    (University of Nottingham)

  • Danilo V. Mascia

    (University of Leeds)

Abstract

We shed light on how the price explosivity characterising Bitcoin and other major cryptocurrencies is triggered, by employing the Quantile Self-Exciting Threshold Autoregressive (QSETAR) model. Our results for Bitcoin, Ripple, and Stellar reveal that the explosive behaviour originates from the extreme upper tails of the return distributions following a price increase in the preceding day. We do not find evidence of explositivity in the price of Litecoin.

Suggested Citation

  • Yuzhi Cai & Thanaset Chevapatrakul & Danilo V. Mascia, 2021. "How is price explosivity triggered in the cryptocurrency markets?," Annals of Operations Research, Springer, vol. 307(1), pages 37-51, December.
    • Handle: RePEc:spr:annopr:v:307:y:2021:i:1:d:10.1007_s10479-021-04298-4
    DOI: 10.1007/s10479-021-04298-4
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    References listed on IDEAS

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    Cited by:

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    4. Abubakr Naeem, Muhammad & Iqbal, Najaf & Lucey, Brian M. & Karim, Sitara, 2022. "Good versus bad information transmission in the cryptocurrency market: Evidence from high-frequency data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Explosiveness; Cryptocurrencies; Bayesian methods; Quantile SETAR model;
    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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