Temporal analysis of asymmetric volatility in cryptocurrencies

Identifier:  TFG:2029

Handle: https://hdl.handle.net/20.500.11797/TFG2029

Authors:  Merediz Solà, Ignasi

Abstract:
In this paper a temporal analysis has been carried out to observe the relationship between the inefficiency caused by the uninformed investors and the asymmetric volatility in the cryptocurrency market. This analysis is done applying the TGARCH model with a rolling windows approach. This work concludes that asymmetric volatility and inefficiency appear in the cryptocurrencies studied. This asymmetry in the volatility makes positive shocks to generate more volatility than negative ones, which is the opposite effect found in traditional financial markets, except for gold. Nevertheless, these factors are not constant throughout the period. In the two major cryptocurrencies neither of the two effects is found, confirming that the higher market capitalization and liquidity improve efficiency and no asymmetry in the volatility is generated. In the other cryptocurrencies, the relationship between inefficiency and asymmetric volatility is found. This relationship could be caused by the Fear of Missing Out (FOMO) effect of uninformed investors and it appears in a different period depending on the cryptocurrency