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Quantile prediction for Bitcoin returns using financial assets’ realized measures

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  • Kawakami, Tabito

Abstract

This paper explores which properties of financial asset prices drive Bitcoin’s return distributions, using quantile regressions with lagged realized moment measures of various financial assets. The result shows that Bitcoin’s lagged realized volatility predicts its return distributions very well, revealing Bitcoin’s aspect as a risk asset. Moreover, its lagged realized kurtosis plays some role in prediction in recent periods. In contrast, other financial assets’ realized measures have limited predictive power, which implies the relative uniqueness of Bitcoin’s price movements. Finally, out-of-sample predictions using lasso quantile regressions confirm the robust predictive power of lagged Bitcoin variables even in the Covid-19 period.

Suggested Citation

  • Kawakami, Tabito, 2023. "Quantile prediction for Bitcoin returns using financial assets’ realized measures," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002167
    DOI: 10.1016/j.frl.2023.103843
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    More about this item

    Keywords

    Quantile regression; Realized measures; Value-at-risk; Prediction; Lasso; Bitcoin;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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