Modelling Volatility of Bitcoin Prices: Classical or Fractional Integrated GARCH Variants?

Abstract

This paper tries to identify which class of GARCH variants best describe the volatility of bitcoin prices. The prices of bitcoin from August 7, 2015 to November 28, 2018 with 1210 daily observations were used. Five classical and four fractional integrated GARCH variants were estimated and based on the obtained AIC and SBIC, the four fractional integrated GARCH models fits better than the classical GARCH models. Results further showed that HYGARCH with Generalized error distribution (GED) tends to be the best fitted model for the bitcoin prices with better forecasting performance based on MAPFE and TI measures.