A principal component-guided sparse regression approach for the determination of bitcoin returns

Abstract

We examine the significance of fourty-one potential covariates of bitcoin returns for the period 2010–2018 (2872 daily observations). The recently introduced principal component-guided sparse regression is employed. We reveal that economic policy uncertainty and stock market volatility are among the most important variables for bitcoin. We also trace strong evidence of bubbly bitcoin behavior in the 2017–2018 period.

Publication
Journal of Risk and Financial Management, 13(2), 33
Orestis Vravosinos
Orestis Vravosinos
PhD student in Economics