Asymmetric volatility in cryptocurrencies

Dirk G. Baur; Thomas Dimpfl

doi:10.1016/j.econlet.2018.10.008

Asymmetric volatility in cryptocurrencies

Dirk G. Baur, Thomas Dimpfl

Research output: Contribution to journal › Article › peer-review

220 Citations (Scopus)

Abstract

This article analyzes asymmetric volatility effects for the 20 largest cryptocurrencies and reports a very different asymmetry compared to equity markets: positive shocks increase the volatility by more than negative shocks. We explain this atypical effect for financial assets with trading activity of uninformed noise traders for positive shocks and trading activity of informed traders for negative shocks. The findings are consistent with “fear of missing out” (FOMO) of uninformed investors and the existence of pump and dump schemes.

Original language	English
Pages (from-to)	148-151
Number of pages	4
Journal	Economics Letters
Volume	173
DOIs	https://doi.org/10.1016/j.econlet.2018.10.008
Publication status	Published - 1 Dec 2018

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10.1016/j.econlet.2018.10.008

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title = "Asymmetric volatility in cryptocurrencies",

abstract = "This article analyzes asymmetric volatility effects for the 20 largest cryptocurrencies and reports a very different asymmetry compared to equity markets: positive shocks increase the volatility by more than negative shocks. We explain this atypical effect for financial assets with trading activity of uninformed noise traders for positive shocks and trading activity of informed traders for negative shocks. The findings are consistent with “fear of missing out” (FOMO) of uninformed investors and the existence of pump and dump schemes.",

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AB - This article analyzes asymmetric volatility effects for the 20 largest cryptocurrencies and reports a very different asymmetry compared to equity markets: positive shocks increase the volatility by more than negative shocks. We explain this atypical effect for financial assets with trading activity of uninformed noise traders for positive shocks and trading activity of informed traders for negative shocks. The findings are consistent with “fear of missing out” (FOMO) of uninformed investors and the existence of pump and dump schemes.

KW - Asymmetric volatility

KW - Bitcoin

KW - Cryptocurrencies

KW - FOMO

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JO - Economics Letters

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Asymmetric volatility in cryptocurrencies

Abstract

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