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Trading volume and the predictability of return and volatility in the cryptocurrency market

2018; Elsevier BV; Volume: 29; Linguagem: Inglês

10.1016/j.frl.2018.08.015

1544-6123

Elie Bouri, Chi Keung Marco Lau, Brian M. Lucey, David Roubaud,

Financial Markets and Investment Strategies

We extend our limited understanding on the Granger causality from trading volume to the returns and volatility in the cryptocurrency market via a copula-quantile causality approach. Using daily data of seven leading cryptocurrencies (Bitcoin, Ripple, Ethereum, Litecoin, Nem, Dash, and Stellar), results show that trading volume Granger causes extreme negative and positive returns of all cryptocurrencies under study. However, volume Granger causes return volatility for only three cryptocurrencies (Litecoin, NEM, and Dash) when the volatility is low. However, this latter result only holds when squared returns are used as a proxy of volatility and not when GARCH volatility is employed.