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Asymmetric volatility in cryptocurrencies

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  • Baur, Dirk G.
  • Dimpfl, Thomas

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.

Suggested Citation

  • Baur, Dirk G. & Dimpfl, Thomas, 2018. "Asymmetric volatility in cryptocurrencies," Economics Letters, Elsevier, vol. 173(C), pages 148-151.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:148-151
    DOI: 10.1016/j.econlet.2018.10.008
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric volatility; Bitcoin; Cryptocurrencies; FOMO;
    All these keywords.

    JEL classification:

    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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