AMU - AMSE
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Sébastien Laurent: sebastien.laurent[at]univ-amu.fr
The recent evolution of cryptocurrencies has been characterized by bubble-like behavior and extreme volatility. While it is diﬃcult to assess an intrinsic value to a speciﬁc cryptocurrency, one can employ recently proposed bubble tests that rely on recursive applications of classical unit root tests. This paper extends this approach to the case where volatility is time varying, assuming a deterministic long-run component that may take into account a decrease of unconditional volatility when the cryptocurrency matures with a higher market dissemination. Volatility also includes a stochastic short-run component to capture volatility clustering. The wild bootstrap is shown to correctly adjust the size properties of the bubble test, which retains good power properties. In an empirical application using eleven of the largest cryptocurrencies and the CRIX index, the general evidence in favor of bubbles is conﬁrmed, but much less pronounced than under constant volatility.