This study explores Bitcoin’s volatility characteristics using different extensions of the GARCH model. The volatility characteristics of bitcoin are compared with to a gold commodity and the S&P 500 index. The purpose is to identify which model fits best for the data and to see how the volatility changes during the time period of 1st February 2017 to 1stFebruary 2022. The dataset is divided into two time periods, one prior to the pandemic which is the low uncertainty period and the other after the pandemic being the high uncertainty period. The attention for cryptocurrencies and especially bitcoin, has risen expeditiously the last couple of years, this makes the analysis appropriate and current for the market. The result showed that bitcoin’s volatility is more effected by the volatility of gold than for S&P 500. The volatility shows that bitcoin was more similar to the behavior of the gold than the S&P 500 prior to the pandemic. Further is there still no clearer explanation and bitcoins behavior cannot be stated as a commodities or financial asset. The GARCH model results showed that bitcoin’s volatility is persistent over time and can therefore be an explanation that will apply well as for the next years. The high volatility time periods of bitcoin can be explained by optimism and overestimate bias. The bias connected the overly confident investment decisions to less accurate rents. Bitcoin is still new on the financial market which makes new knowledge extremely important in order to create safer investment portfolios.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:lnu-113509 |
| Date | January 2022 |
| Creators | Nicole, Persson, Philippa, Blomqvist |
| Publisher | Linnéuniversitetet, Institutionen för nationalekonomi och statistik (NS) |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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