The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency

Purpose – This paper aims to examine whether the crypto-currencies’ market returns are symmetric or asymmetric informative, through analysing the daily logarithmic returns of bitcoin currency over the period of 2011-2017. Design/methodology/approach – In doing so, the symmetric informative analy...

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Main Authors:	Othman, Anwar Hasan Abdullah, Syed Jaafar Alhabshi, Syed Musa, Haron, Razali
Format:	Article
Language:	English English
Published:	Emerald Publisher 2019
Subjects:	HG201 Money HG3691 Credit
Online Access:	http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/8/72480%20The%20effect%20of%20symmetric%20-SCOPUS.pdf http://irep.iium.edu.my/72480/19/72480%20-%20The%20effect%20of%20symmetric%20and%20asymmetric%20information.pdf

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recordtype	eprints
spelling	iium-724802020-02-20T01:32:22Z http://irep.iium.edu.my/72480/ The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Haron, Razali HG201 Money HG3691 Credit Purpose – This paper aims to examine whether the crypto-currencies’ market returns are symmetric or asymmetric informative, through analysing the daily logarithmic returns of bitcoin currency over the period of 2011-2017. Design/methodology/approach – In doing so, the symmetric informative analysis is estimated by applying the generalised auto-regressive conditional heteroscedasticity (GARCH) (1,1) model, whereasasymmetric informative or leverage effects analysis is estimated by exponential GARCH (1,1), asymmetric power ARCH (1,1) and threshold GARCH (1,1) models. In addition, the generalized autoregressive conditional heteroskedasticity in mean (GARCH-M (1,1)) was applied to examine whether the risk-return trade-off phenomenon was persistent in crypto-currencies market. Findings – The main findings indicate that bitcoin market return or volatility is symmetric informative and has a long memory to persist in the future. Furthermore, the symmetric volatility is found to be more sensitive to its past values (lagged) than to the new shock of the market values. However, asymmetric informative response of volatility to the negative and the positive shocks do not exist in the bitcoin market or, in other words, there is no leverage effect. This suggests that the bitcoin market is in harmony with the efficient market hypothesis (EMH) with respect to the asymmetric information and violated the EMH with regard to the symmetric information. Hence, the market price or return of bitcoin currency could not be predicted by simply exercising such past market information in the short-run investment. In addition, the estimated coefficient of conditional variance or risk premium (l ) in the mean equation of CHARCH–M (1,1) model is positive however, statistically insignificant. This indicates the absence of risk-return trade-off, in which case the higher market risk will not essentially lead to higher market returns. This paper has proposed that an investment in the crypto-currency market is more appropriate for riskaverse investors than risk takers. Originality/value – The findings of the study will provide investors with necessary information about the bitcoin market price efficiency, hedging effectiveness and risk management. Emerald Publisher 2019-08-05 Article PeerReviewed application/pdf en http://irep.iium.edu.my/72480/8/72480%20The%20effect%20of%20symmetric%20-SCOPUS.pdf application/pdf en http://irep.iium.edu.my/72480/19/72480%20-%20The%20effect%20of%20symmetric%20and%20asymmetric%20information.pdf Othman, Anwar Hasan Abdullah and Syed Jaafar Alhabshi, Syed Musa and Haron, Razali (2019) The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency. Journal of Financial Economic Policy, 11 (3). pp. 432-450. ISSN 1757-6385 https://www.emerald.com/insight/content/doi/10.1108/JFEP-10-2018-0147/full/pdf?title=the-effect-of-symmetric-and-asymmetric-information-on-volatility-structure-of-crypto-currency-markets-a-case-study-of-bitcoin-currency http://dx.doi.org/10.1108/JFEP-10-2018-0147
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HG201 Money HG3691 Credit
spellingShingle	HG201 Money HG3691 Credit Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Haron, Razali The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
description	Purpose – This paper aims to examine whether the crypto-currencies’ market returns are symmetric or asymmetric informative, through analysing the daily logarithmic returns of bitcoin currency over the period of 2011-2017. Design/methodology/approach – In doing so, the symmetric informative analysis is estimated by applying the generalised auto-regressive conditional heteroscedasticity (GARCH) (1,1) model, whereasasymmetric informative or leverage effects analysis is estimated by exponential GARCH (1,1), asymmetric power ARCH (1,1) and threshold GARCH (1,1) models. In addition, the generalized autoregressive conditional heteroskedasticity in mean (GARCH-M (1,1)) was applied to examine whether the risk-return trade-off phenomenon was persistent in crypto-currencies market. Findings – The main findings indicate that bitcoin market return or volatility is symmetric informative and has a long memory to persist in the future. Furthermore, the symmetric volatility is found to be more sensitive to its past values (lagged) than to the new shock of the market values. However, asymmetric informative response of volatility to the negative and the positive shocks do not exist in the bitcoin market or, in other words, there is no leverage effect. This suggests that the bitcoin market is in harmony with the efficient market hypothesis (EMH) with respect to the asymmetric information and violated the EMH with regard to the symmetric information. Hence, the market price or return of bitcoin currency could not be predicted by simply exercising such past market information in the short-run investment. In addition, the estimated coefficient of conditional variance or risk premium (l ) in the mean equation of CHARCH–M (1,1) model is positive however, statistically insignificant. This indicates the absence of risk-return trade-off, in which case the higher market risk will not essentially lead to higher market returns. This paper has proposed that an investment in the crypto-currency market is more appropriate for riskaverse investors than risk takers. Originality/value – The findings of the study will provide investors with necessary information about the bitcoin market price efficiency, hedging effectiveness and risk management.
format	Article
author	Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Haron, Razali
author_facet	Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Haron, Razali
author_sort	Othman, Anwar Hasan Abdullah
title	The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
title_short	The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
title_full	The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
title_fullStr	The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
title_full_unstemmed	The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
title_sort	effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency
publisher	Emerald Publisher
publishDate	2019
url	http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/ http://irep.iium.edu.my/72480/8/72480%20The%20effect%20of%20symmetric%20-SCOPUS.pdf http://irep.iium.edu.my/72480/19/72480%20-%20The%20effect%20of%20symmetric%20and%20asymmetric%20information.pdf
first_indexed	2023-09-18T21:42:42Z
last_indexed	2023-09-18T21:42:42Z
_version_	1777413246427332608

The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency

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