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Asymmetric effects of global factors on return of cryptocurrencies by novel nonlinear quantile approaches

Author

Listed:
  • Mustafa Tevfik Kartal

    (Financial Reporting, and Investor Relations Directorate)

  • Mustafa Kevser

    (Bandırma Onyedi Eylül University)

  • Fatih Ayhan

    (Bandırma Onyedi Eylül University)

Abstract

This study examines the asymmetric effects of global factors on the returns of cryptocurrencies. In this context, the study focuses on Bitcoin, Ethereum, and Ripple as top-traded cryptocurrencies, considers eight global factors, and uses high-frequency (i.e., daily) data between February 8, 2018, and June 21, 2022. Also, the study applies nonparametric causality in quantiles (NCQ) and quantile-on-quantile regression (QQR) as the main models and quantile regression (QR) as the robustness model. The empirical findings reveal that (i) effects of global factors on the returns of cryptocurrencies are asymmetric and generally positive; (ii) there are nonparametric causal effects from global factors to cryptocurrencies for return and volatility in most quantiles excluding some lower and higher quantiles; (iii) effects of the global factors on cryptocurrencies differentiate according to global factors, cryptocurrencies, and quantiles; (iv) the QR results confirm the robustness of the empirical findings; and (v) overall, the outcomes underline the asymmetric and varying effects of global factors on the returns of cryptocurrencies across quantiles. Hence, the results imply that traders and investors should consider the asymmetric effects of global factors on the returns of cryptocurrencies for trading, investment, and hedging purposes. Moreover, some policy recommendations are proposed.

Suggested Citation

  • Mustafa Tevfik Kartal & Mustafa Kevser & Fatih Ayhan, 2023. "Asymmetric effects of global factors on return of cryptocurrencies by novel nonlinear quantile approaches," Economic Change and Restructuring, Springer, vol. 56(3), pages 1515-1535, June.
    • Handle: RePEc:kap:ecopln:v:56:y:2023:i:3:d:10.1007_s10644-023-09484-x
    DOI: 10.1007/s10644-023-09484-x
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    More about this item

    Keywords

    Cryptocurrencies; Global factors; Return; Volatility; NCQ; QQR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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