Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238870 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 11 [Issue:] 2 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-12
Publisher: 
MDPI, Basel
Abstract: 
We use the GARCH-MIDAS model to extract the long- and short-term volatility components of cryptocurrencies. As potential drivers of Bitcoin volatility, we consider measures of volatility and risk in the US stock market as well as a measure of global economic activity. We find that S&P 500 realized volatility has a negative and highly significant effect on long-term Bitcoin volatility. The finding is atypical for volatility co-movements across financial markets. Moreover, we find that the S&P 500 volatility risk premium has a significantly positive effect on long-term Bitcoin volatility. Finally, we find a strong positive association between the Baltic dry index and long-term Bitcoin volatility. This result shows that Bitcoin volatility is closely linked to global economic activity. Overall, our findings can be used to construct improved forecasts of long-term Bitcoin volatility.
Subjects: 
Baltic dry index
Bitcoin volatility
digital currency
GARCH-MIDAS
pro-cyclical volatility
volume
JEL: 
C53
C58
F31
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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