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Trading volume and return volatility of Bitcoin market: evidence for the sequential information arrival hypothesis

  • Pengfei Wang
  • Wei Zhang
  • Xiao Li
  • Dehua ShenEmail author
Regular Article
  • 42 Downloads

Abstract

This paper gives the first empirical evidence on the relationships between trading volume and return volatility of the Bitcoin denominated in fifteen foreign currencies by investigating two competing hypotheses, i.e., mixture of distribution hypothesis (MDH) and sequential information arrival hypothesis (SIAH). Allowing for both linear and nonlinear correlation and causality tests, the empirical results mainly show that: first, trading volume and return volatility are negatively correlated, implying a lack of support for the MDH; second, we document significant lead–lag relationships between trading volume and return volatility, which support the SIAH; third, the results are robust to alternative measurements of trading volume, data source and sub-period analysis. Generally speaking, these findings have practical implications for investors, who are interested in investing in Bitcoin market.

Keywords

Bitcoin Trading volume Return volatility Mixture of distribution hypothesis Sequential information arrival hypothesis Foreign currencies 

JEL Classification

G12 G14 

Notes

Acknowledgements

This work is supported by the National Natural Science Foundation of China (71701150, 71790590 and 71790594), Young Elite Scientists Sponsorship Program by Tianjin (TJSQNTJ-2017-09) and the Fundamental Research Funds for the Central Universities (63192237).

Compliance with ethical standards

Conflict of interest

The authors declare that there are no conflict of interest regarding the publication of this article.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.College of Management and EconomicsTianjin UniversityTianjinPeople’s Republic of China
  2. 2.School of FinanceNankai UniversityTianjinPeople’s Republic of China

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