Abstract
ABSTRACT This study employed an augmented AR-GJRGARCH model that incorporates an intraday-based buy-sell order size imbalance measure to explore how informed trading behaviour/activity impacted Bitcoin returns and volatility from January 2014 to February 2019. Our results show that the informed trading behaviour dominated by sell-order significantly led to decreased concurrent Bitcoin returns for alternative sample periods. However, the informed trading behaviour dominated by buy-order related positively to Bitcoin returns only for the full sample period. Moreover, the informed trading activity helped to reduce Bitcoin’s volatility, which is consistent with expectations based on dispersion of beliefs models. Finally, we uncovered a positive (inverted) asymmetric volatility effect for both the full and the rising sample periods, indicating the presence of the ‘fear of missing out’ psychological effect.
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