Liquidity Shocks, Price Volatilities, and Risk-managed Strategy: Evidence from Bitcoin and Beyond

IF 2.9 3区经济学 Q2 BUSINESS, FINANCE

Journal of Multinational Financial Management Pub Date : 2022-06-01 DOI:10.1016/j.mulfin.2022.100729

Tao Tang , Yanchen Wang

引用次数: 1

Abstract

This study examines the prediction power of market liquidity (the ease with which asset are traded) and funding liquidity (the ease with which traders can obtain funding) on the price volatilities of Bitcoin. We find that both market and funding liquidity shocks forecast future volatility. More importantly, liquidity shocks have a stronger and persistent effect on the long-term trend component of volatility. Exploiting the predictability of liquidity shocks, we propose a risk-managed strategy to manage extremely high volatility and avoid occasional large crashes in cryptocurrency markets. This novel strategy virtually eliminates crashes and improves the Sharpe ratio substantially against the benchmark buy-and-hold strategy. The outperformance is much stronger during the turbulent periods of cryptocurrencies. Hence, this paper provides important insights into cryptocurrency investment and portfolio management combining traditional assets and cryptocurrencies.

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流动性冲击、价格波动和风险管理策略:来自比特币及其他领域的证据

本研究考察了市场流动性(资产交易的便利性)和资金流动性(交易者获得资金的便利性)对比特币价格波动的预测能力。我们发现市场和资金流动性冲击都预测了未来的波动。更重要的是，流动性冲击对波动性的长期趋势成分具有更强、更持久的影响。利用流动性冲击的可预测性，我们提出了一种风险管理策略，以管理极高的波动性，并避免加密货币市场偶尔出现的大规模崩盘。这种新颖的策略实际上消除了崩盘，并大大提高了夏普比率，而不是基准的买入并持有策略。在加密货币的动荡时期，这种表现要强劲得多。因此，本文提供了结合传统资产和加密货币的加密货币投资和投资组合管理的重要见解。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Multinational Financial Management BUSINESS, FINANCE-

CiteScore

7.30

自引率

4.80%

发文量

审稿时长

30 days

期刊介绍： International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.