Browse > Article
http://dx.doi.org/10.21219/jitam.2018.25.4.157

Systematic Risk Analysis on Bitcoin Using GARCH Model  

Lee, Jung Mann (Hoseo University, Department of Management of Digital Technology)
Publication Information
Journal of Information Technology Applications and Management / v.25, no.4, 2018 , pp. 157-169 More about this Journal
Abstract
The purpose of this study was to examine the volatility of bitcoin, diagnose if bitcoin are a systematic risk asset, and evaluate their effectiveness by estimating market beta representing systematic risk using GARCH (Generalized Auto Regressive Conditional Heteroskedastieity) model. First, the empirical results showed that the market beta of Bitcoin using the OLS model was estimated at 0.7745. Second, using GARCH (1, 2) model, the market beta of Bitcoin was estimated to be significant, and the effects of ARCH and GARCH were found to be significant over time, resulting in conditional volatility. Third, the estimated market beta of the GARCH (1, 2), AR (1)-GARCH (1), and MA (1)-GARCH (1, 2) models were also less than 1 at 0.8819, 0.8835, and 0.8775 respectively, showing that there is no systematic risk. Finally, in terms of efficiency, GARCH model was more efficient because the standard error of a market beta was less than that of the OLS model. Among the GARCH models, the MA (1)-GARCH (1, 2) model considering non-simultaneous transactions was estimated to be the most appropriate model.
Keywords
Bitcoin; Volatility; Systematic Risk; GARCH Model;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Bera, A., Bubnys, E., and H. Park, "Conditional Heteroscedasticity in the Market Model and Efficient Estimates of Betas", The Financial Review, Vol. 23, 1988, pp. 201-214.
2 Berndt, E., Hall, B., Hall, R., and Hausman, J., "Estimation and Inference in Nonlinear Structural Models", Annals of Economic and Social Measurement, Vol. 3, No. 4, 1974, pp. 653-665.
3 Bollerslev, T., "Generalized Autoregressive Conditional Heteroscedasticity", Journal of Econometrics, Vol. 3, 1986, pp. 307-327.
4 Briere, M., Oosterlinck, K., and Szafarz, A., "Virtual currency, tangible return: Portfolio diversification with bitcoin", Journal of Asset Management, Vol. 16, No. 6, 2015, pp. 365-373.   DOI
5 Chung, J. and Kim, H., "Optimal Estimation of Conditional Variance Model and Estimation of Systematic Risk", Financial Study, Vol. 9, 1995, pp. 199-225.
6 Deokgo, Y., Seo, Y., and Han, B., "A Study on the Capital Cost Decision of Korea Telecom using Financial Data", Information and Communication Policy Research, Vol. 3, No. 1, 1996, pp. 31-45.
7 Dyhrberg, A. H., "Bitcoin, gold and the dollar: A GARCH volatility analysis", Finance Research Letters, Vol. 16, 2016a, pp. 85-92.
8 Dyhrberg, A. H., "Hedging capabilities of bitcoin: Is it the virtual gold?", Finance Research Letters, Vol. 16, 2016b, pp. 139-144.
9 Engle, R., "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of U.K. Inflation", Econometrica, Vol. 50, 1982, pp. 987-1008.
10 Fama, E., "The Behaviour of Stock Market Prices", Journal of Business, Vol. 64, 1965, pp. 34-105.
11 Ghosh, A. K., "Market Model Corrected for Generalized Autoregressive Conditional Heteroscedasticity and the Small Firm Effect", The Journal of Financial Research, Vol. 15, 1992, pp. 277-283.
12 Heisenberg, Spillover Risk: Crypto currencies may pose a very real threat to stock and the Economy, 2018, 1. 28, https://seekingalpha.com/article/4140768-spillover-risk-cryptocurrencies-may-pose-real-threat-stocks-economy.
13 Kim, G., Establishing a united front for each central bank's crypto-currency to calm down the bargain sale on Bitcoin and Litecoin, Money Net, 2017, 6. 26.
14 Koutmos, G., Lee, U., and Theodossiou, P., "Time-Varying Betas and Volatility Persistence in Internaltional Stock Markets", Journal of Economics and Business, Vol. 46, 1994, pp. 101-112.
15 Lee, H., Systematic Risk and Unsystematic Risk, LG Weekly Economy, 2003, 7. 30.
16 Scholes, M. and Williams, J., "Estimating Betas from Nonsynchronous Data", Journal of Financial Economics, Vol. 5, 1977, pp. 309-327.
17 Lee, J. M. and Nam, C., "Estimation of Systematic Risk Using Conditional Variance Model", Information and Communication Policy Research, Vol. 6, No. 2, 1999, pp. 17-155.
18 Lo, A. W. and Mackinlay, A. C., "An Econometric Analysis of Nonsynchronous Trading", Journal of Econometrics, Vol. 45, 1990, pp. 181-211.   DOI
19 Mandelbrot, B., "The Variation of Certain Speculative Prices", The Journal of Business, Vol. 36, No. 4, 1963, pp. 394-419.   DOI
20 Scott Gilbert and Hio Loi, "Digital Currency Risk", International Journal of Economics and Finance, Vol. 10, No. 2, 2018, pp. 108-123.   DOI
21 The Economist, Bitcoin is a speculative asset but not yet a systematic risk, Dec. 16, 2017.
22 Cermak, V., "Can Bitcoin Become a Viable Alternative to Fiat Currencies? An empirical analysis of Bitcoin's volatility based on a GARCH model", Economics Student Theses and Capstone Projects, Vol. 67, 2017, http://creativematter.skidmore.edu/econ_studt_schol/67.
23 https://ko.wikipedia.org/wiki/%EC%B2%B4%EA%B3%84%EC%A0%81_%EC%9C%84%ED%97%98.
24 Lee, J. M., Esimation of Time varying Risk Premia for the Nikkei 225 Stock Index Futures Contracts, The City University of New York, Dissertation, Unpublished, 1997.