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Trading volume and the predictability of return and volatility in the cryptocurrency market

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  • Bouri, Elie
  • Lau, Chi Keung Marco
  • Lucey, Brian
  • Roubaud, David

Abstract

We extend our limited understanding on the Granger causality from trading volume to the returns and volatility in the cryptocurrency market via a copula-quantile causality approach. Using daily data of seven leading cryptocurrencies (Bitcoin, Ripple, Ethereum, Litecoin, Nem, Dash, and Stellar), results show that trading volume Granger causes extreme negative and positive returns of all cryptocurrencies under study. However, volume Granger causes return volatility for only three cryptocurrencies (Litecoin, NEM, and Dash) when the volatility is low. However, this latter result only holds when squared returns are used as a proxy of volatility and not when GARCH volatility is employed.

Suggested Citation

  • Bouri, Elie & Lau, Chi Keung Marco & Lucey, Brian & Roubaud, David, 2019. "Trading volume and the predictability of return and volatility in the cryptocurrency market," Finance Research Letters, Elsevier, vol. 29(C), pages 340-346.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:340-346
    DOI: 10.1016/j.frl.2018.08.015
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    References listed on IDEAS

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    More about this item

    Keywords

    Trading volume; Return; Volatility; Cryptocurrency; Copula-quantile causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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