Abstract
AbstractThe primary purpose of this paper is to investigate whether a novel Markov regime‐switching mixed‐data sampling (MRS‐MIADS) model we design can improve the prediction accuracy of the realized variance (RV) of Bitcoin. Moreover, to verify whether the importance of jumps for RV forecasting changes over time, we extend the standard MIDAS model to characterize two volatility regimes and introduce a jump‐driven time‐varying transition probability between the two regimes. Our results suggest that the proposed novel MRS‐MIDAS model exhibits statistically significant improvement for forecasting the RV of Bitcoin. In addition, we find that jump occurrences significantly increase the persistence of the high‐volatility regime and switch between high‐ and low‐volatility regimes. A wide range of checks confirm the robustness of our results. Finally, the proposed model shows significant improvement for 2‐week and 1‐month horizon forecasts.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
