Asymmetric Mean Reversion of Bitcoin Price Returns

29 Pages Posted: 24 Aug 2018

See all articles by Shaen Corbet

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Paraskevi Katsiampa

Sheffield University Management School

Date Written: August 14, 2018

Abstract

Non-linearity is characterized by an asymmetric mean-reverting property, which has been found to be inherent in the short-term return dynamics of stocks. In this paper, we explore as to whether cryptocurrency returns, as represented by Bitcoin, exhibit similar asymmetric reverting patterns for minutely, hourly, daily and weekly returns between June 2010 and February 2018. We identify several differences in the behavior of Bitcoin price returns in the pre-and post-$1,000 sub-periods and evidence of asymmetric reverting patterns in the Bitcoin price returns under all the ANAR models employed, regardless of the data frequency considered. We also present evidence indicating stronger reverting behavior of negative price returns in terms of both reverting speed and magnitude compared to positive returns and evidence of positive serial correlation with prior positive price returns. Finally, we also investigated asymmetries in Bitcoin price return series’ persistence by employing higher order ANAR models, finding evidence of a higher persistence of positive returns than negative returns, a result that further supports the existence of asymmetric reverting behavior in the Bitcoin price returns.

Suggested Citation

Corbet, Shaen and Katsiampa, Paraskevi, Asymmetric Mean Reversion of Bitcoin Price Returns (August 14, 2018). Available at SSRN: https://ssrn.com/abstract=3231161 or http://dx.doi.org/10.2139/ssrn.3231161

Shaen Corbet (Contact Author)

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Paraskevi Katsiampa

Sheffield University Management School ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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