Can intraday public information explain Bitcoin Returns and Volatility? A PGARCH-Based Approach

Abstract

This paper examines two competing hypotheses, that is, mixture of distribution hypothesis (MDH) and sequential information arrival hypothesis (SIAH) in the cryptocurrency market using high-frequency data. Specifically, we attempt to test the explanatory power of intraday public information arrival for Bitcoin returns and volatility over the period from January 1, 2019 to May 16, 2019. Based on AR (2)-PGARCH (1.1. δ), the empirical results reveal the following: First, we find more evidence to support the MDH than the SIAH since the current trading volume participates to absorb the persistence of Bitcoin volatility stronger than the lagged trading volume. Second, solid evidence of the instantaneous effect of intraday trading volume on intraday Bitcoin returns is verified more than the lagged effect, which supports the MDH rather than the SIAH.