Abstract
This paper explores which properties of financial asset prices drive Bitcoin’s return distributions, using quantile regressions with lagged realized moment measures of various financial assets. The result shows that Bitcoin’s lagged realized volatility predicts its return distributions very well, revealing Bitcoin’s aspect as a risk asset. Moreover, its lagged realized kurtosis plays some role in prediction in recent periods. In contrast, other financial assets’ realized measures have limited predictive power, which implies the relative uniqueness of Bitcoin’s price movements. Finally, out-of-sample predictions using lasso quantile regressions confirm the robust predictive power of lagged Bitcoin variables even in the Covid-19 period.
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