Structural breaks and double long memory of cryptocurrency prices: A comparative analysis from Bitcoin and Ethereum

Walid Mensi, Khamis Al Yahyaee, Sang Hoon Kang

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

This study explores the impacts of structural breaks (SB) on the dual long memory levels of Bitcoin and Ethereum price returns. We identify dual long memory and structural changes on cryptocurrency markets using four different generalized autoregressive conditional heteroskedasticity models (e.g., GARCH, FIGARCH, FIAPARCH, and HYGARCH). Furthermore, the persistence level of both returns and volatility decreases after accounting for long memory and switching states. Finally, the FIGARCH model with SB variables provides a comparatively superior forecasting accuracy performance. These findings have significant implications for both cryptocurrency allocations and portfolio management.

Original languageEnglish
JournalFinance Research Letters
DOIs
Publication statusAccepted/In press - Jan 1 2018

Fingerprint

Structural breaks
Long memory
Comparative analysis
Structural change
Persistence
Forecasting accuracy
GARCH model
Portfolio management
Autoregressive conditional heteroskedasticity

Keywords

  • Bitcoin
  • Ethereum
  • GARCH family models
  • Long memory
  • Structural breaks

ASJC Scopus subject areas

  • Finance

Cite this

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AB - This study explores the impacts of structural breaks (SB) on the dual long memory levels of Bitcoin and Ethereum price returns. We identify dual long memory and structural changes on cryptocurrency markets using four different generalized autoregressive conditional heteroskedasticity models (e.g., GARCH, FIGARCH, FIAPARCH, and HYGARCH). Furthermore, the persistence level of both returns and volatility decreases after accounting for long memory and switching states. Finally, the FIGARCH model with SB variables provides a comparatively superior forecasting accuracy performance. These findings have significant implications for both cryptocurrency allocations and portfolio management.

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