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The return volatility of cryptocurrencies during the COVID-19 pandemic: Assessing the news effect

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  • Salisu, Afees A.
  • Ogbonna, Ahamuefula E.

Abstract

In this paper, we test the role of news in the predictability of return volatility of digital currency market during the COVID-19 pandemic. We use hourly data for cryptocurrencies and daily data for the news indicator, thus, the GARCH MIDAS framework which allows for mixed data frequencies is adopted. We validate the presupposition that fear-induced news triggered by the COVID-19 pandemic increases the return volatilities of the cryptocurrencies compared with the period before the pandemic. We also establish that the predictive model that incorporates the news effects forecasts the return volatility better than the benchmark (historical average)model.

Suggested Citation

  • Salisu, Afees A. & Ogbonna, Ahamuefula E., 2022. "The return volatility of cryptocurrencies during the COVID-19 pandemic: Assessing the news effect," Global Finance Journal, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:glofin:v:54:y:2022:i:c:s1044028321000399
    DOI: 10.1016/j.gfj.2021.100641
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    Cited by:

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    2. Jakub Kubiczek & Marcin Tuszkiewicz, 2022. "Intraday Patterns of Liquidity on the Warsaw Stock Exchange before and after the Outbreak of the COVID-19 Pandemic," IJFS, MDPI, vol. 10(1), pages 1-16, February.

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    More about this item

    Keywords

    Cryptocurrencies; COVID-19; News; GARCH MIDAS;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G01 - Financial Economics - - General - - - Financial Crises
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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