A comparative analysis of the volatility nature of cryptocurrency and JSE market
Despite the rapid growth of developing markets, aided by globalization, comparative studies of cryptocurrency and stock market volatility have focused on the developed markets and neglected developing ones. In this regard, this study compares cryptocurrency volatility with that of the Johannesburg S...
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| Format: | Article |
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LLC "CPC "Business Perspectives"
2022-10-01
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| Series: | Investment Management & Financial Innovations |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/17177/IMFI_2022_04_Kaseke.pdf |
| _version_ | 1797947514946584576 |
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| author | Forbes Kaseke Shaun Ramroop Henry Mwambi |
| author_facet | Forbes Kaseke Shaun Ramroop Henry Mwambi |
| author_sort | Forbes Kaseke |
| collection | DOAJ |
| description | Despite the rapid growth of developing markets, aided by globalization, comparative studies of cryptocurrency and stock market volatility have focused on the developed markets and neglected developing ones. In this regard, this study compares cryptocurrency volatility with that of the Johannesburg Stock Exchange (JSE), a developing market. GARCH-type models are applied to daily log returns of Bitcoin, Ethereum, and the FTSE/JSE 4O in two ways. Firstly, the models are applied directly; secondly, structural breaks are tested and accounted for in the models. The sample period was from September 18, 2017, to May 27, 2021. The results show higher volatility and higher volatility persistence in cryptocurrency than in the JSE market. They also show that persistence is overestimated for cryptocurrencies when structural breaks are not accounted for. The opposite was true for the JSE.Moreover, the two cryptocurrencies were found to have close to identical volatility plots that differ from that of the JSE. High volatility periods of cryptocurrency also did not coincide with that of JSE and those of JSE did not coincide with the cryptocurrency ones. There is also evidence of an inverse leverage effect in cryptocurrency, which opposes the normal leverage effect of the JSE market. |
| first_indexed | 2024-04-10T21:29:13Z |
| format | Article |
| id | doaj.art-27bd648091f64a2a9532a558142a091c |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2024-04-10T21:29:13Z |
| publishDate | 2022-10-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-27bd648091f64a2a9532a558142a091c2023-01-19T14:16:56ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582022-10-01194233910.21511/imfi.19(4).2022.0317177A comparative analysis of the volatility nature of cryptocurrency and JSE marketForbes Kaseke0https://orcid.org/0000-0001-9218-3956Shaun Ramroop1https://orcid.org/0000-0001-9305-6967Henry Mwambi2https://orcid.org/0000-0001-9654-400XPh.D. in Statistics, College of Agriculture, Engineering and Science, School of Mathematics, Statistics and Computer Science, University of Kwazulu-NatalProfessor, College of Agriculture, Engineering and Science, School of Mathematics, Statistics and Computer Science, University of Kwazulu-NatalProfessor, College of Agriculture, Engineering and Science, School of Mathematics, Statistics and Computer Science, University of Kwazulu-NatalDespite the rapid growth of developing markets, aided by globalization, comparative studies of cryptocurrency and stock market volatility have focused on the developed markets and neglected developing ones. In this regard, this study compares cryptocurrency volatility with that of the Johannesburg Stock Exchange (JSE), a developing market. GARCH-type models are applied to daily log returns of Bitcoin, Ethereum, and the FTSE/JSE 4O in two ways. Firstly, the models are applied directly; secondly, structural breaks are tested and accounted for in the models. The sample period was from September 18, 2017, to May 27, 2021. The results show higher volatility and higher volatility persistence in cryptocurrency than in the JSE market. They also show that persistence is overestimated for cryptocurrencies when structural breaks are not accounted for. The opposite was true for the JSE.Moreover, the two cryptocurrencies were found to have close to identical volatility plots that differ from that of the JSE. High volatility periods of cryptocurrency also did not coincide with that of JSE and those of JSE did not coincide with the cryptocurrency ones. There is also evidence of an inverse leverage effect in cryptocurrency, which opposes the normal leverage effect of the JSE market.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/17177/IMFI_2022_04_Kaseke.pdfasymmetryBitcoincryptocurrencypersistencestructural breaksvolatility |
| spellingShingle | Forbes Kaseke Shaun Ramroop Henry Mwambi A comparative analysis of the volatility nature of cryptocurrency and JSE market Investment Management & Financial Innovations asymmetry Bitcoin cryptocurrency persistence structural breaks volatility |
| title | A comparative analysis of the volatility nature of cryptocurrency and JSE market |
| title_full | A comparative analysis of the volatility nature of cryptocurrency and JSE market |
| title_fullStr | A comparative analysis of the volatility nature of cryptocurrency and JSE market |
| title_full_unstemmed | A comparative analysis of the volatility nature of cryptocurrency and JSE market |
| title_short | A comparative analysis of the volatility nature of cryptocurrency and JSE market |
| title_sort | comparative analysis of the volatility nature of cryptocurrency and jse market |
| topic | asymmetry Bitcoin cryptocurrency persistence structural breaks volatility |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/17177/IMFI_2022_04_Kaseke.pdf |
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