Title: Volatility dynamics and diversification benefits of Bitcoin under asymmetric and long memory effects

Authors: Ahmed Jeribi; Mohamed Fakhfekh; Anis Jarboui

Addresses: Faculty of Economics and Management, University of Monastir, Road Taher Hadded, B.P 56, Monastir 5000, Tunisia ' Higher Institute of Business Administration of Sfax, Sfax University, BP 1013, Tunisia ' Higher Institute of Business Administration of Sfax, Sfax University, BP 1013, Tunisia

Abstract: The purpose lying behind this paper is twofold. In the first place, it aims at discussing the volatility dynamics of Bitcoin, gold, oil price and stock market indices in terms of goodness-of-fit to asymmetric and long-memory GARCH models. In the second place, it focuses on examining diversification benefits of Bitcoin between 19 August 2011 and 9 November 2018 using mean-variance spanning tests. It has been discovered that the most effectively fit framework turns out to be the Fractionally Integrated Exponential GARCH model (FIEGARCH), displaying the highly significant characteristic of encompassing both of the asymmetric as well as long-memory components of conditional variance. The reached findings suggest that the shock impact on Bitcoin and gold return volatilities have proven to be permanent, while its persistence on the other indices has been discovered to be transitory. Indeed, the results show that Bitcoin yields significant diversification benefits when being added to a well-diversified benchmark portfolio.

Keywords: Bitcoin; gold; stock market indices; FIEGARCH; mean-variance spanning test.

DOI: 10.1504/GBER.2022.120005

Global Business and Economics Review, 2022 Vol.26 No.1, pp.65 - 83

Received: 26 Feb 2021
Accepted: 25 May 2021
Published online: 04 Jan 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article