University of Twente Student Theses


Factors influencing the volatility of bitcoin returns: An empirical study

Nypels, M (2021) Factors influencing the volatility of bitcoin returns: An empirical study.

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Abstract:This thesis examines the bitcoin returns volatility and various factors, and formulates the following research question: ‘’Which factors influence the volatility of bitcoin returns?’’ This study uses the GARCH (1,1) model and examines five different independent variables, namely trading volume (weekly number of bitcoin traded on Bitstamp), information demand (weekly number of searches from Google Trends), MSCI ACWI world stock market index returns, USD/EURO exchange rate and USD/JPY exchange rate. The sample consists of weekly data from the 5th of January 2014 until the 27th of December 2020, and has been split into two subsample periods due to the increased interest in bitcoin starting from 2017. The results of the variance equation within the GARCH (1,1) model finds support for a positive impact of the number of bitcoin traded on Bitstamp and the number of searches on Google Trends on bitcoin returns volatility, and supports there being no effect of the stock market returns. However, the results find no support for the positive influence of both the exchange rates.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics
Programme:Business Administration MSc (60644)
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