Jumps and Cojumps analyses of major and minor cryptocurrencies

Abstract

This paper empirically examines jumps and cojumps of both major and minor cryptocurrencies. Understanding the nature of their jumps and cojumps plays an important role in risk management, asset allocation and pricing of derivatives. We find that all cryptocurrencies display significant jumps. Furthermore, minor cryptocurrencies appear to have significantly higher jump intensity and jump size than major cryptocurrencies. Finally, we find that cojumps of the Thai stock market index and minor cryptocurrencies have a greater intensity than that of major cryptocurrencies.

An analysis of investors’ behavior in Bitcoin market

“…Mostly, the flourishing interest of academia in this relatively new asset class was driven by its unique nature (see [ 2 , 3 ] for a comprehensive review). To all appearances, among the empirically documented inherent features of these synthetic currencies, it seems that so far several are indisputable, to wit, high volatility [ 4 – 6 ], clustering and long memory of volatility [ 7 – 10 ], the presence of jumps [ 11 – 13 ], high correlation within the crypto market [ 14 – 16 ] but relative isolation from other asset classes in normal times [ 17 – 19 ] and increased contagion in severe turbulent times [ 20 – 22 ], etc. The most disputable characteristics of this atypical asset refer to the investment or currency potential and its ability to act or not as a safe haven.…”

The effect of COVID‐19 on the global stock market

“…( 2011 ) and Phiromswad et al . ( 2021 ), advocate the use of so‐called realised volatilities (constructed from the summation of the squared intraday interval return) as a practical method for improving the ex‐post volatility measures. Theoretically, these realised volatilities are free from measurement error (Andersen et al ., 2003 ).…”

“…We contribute to the literature in several respects. First, we add to the literature that utilises high‐frequency data to capture volatility dynamics (e.g., Andersen et al ., 2003 ; Tanthanongsakkun et al ., 2018 ; Ho et al ., 2021 ; Phiromswad et al ., 2021 ). For instance, Phiromswad et al .…”

“…For instance, Phiromswad et al . ( 2021 ) examine co‐jumps of 54 cryptocurrencies with the Thai stock market. Wang et al .…”

“…The nonparametric jump technique dates back to 2002 and four approaches are popular in the existing literature. We choose the Barndorff‐Nielsen and Shephard ( 2004 , 2006 ) approach as it is one of the earliest approaches and has been successfully adopted by various authors from 2002 until recently in 2021 (see Andersen et al ., 2003 ; Tanthanongsakkun et al ., 2018 ; Ho et al ., 2021 ; Phiromswad et al ., 2021 ).…”