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Jurnal Ekonomi Malaysia

57 (2) 2023 107 – 122

Detecting Structural Breaks in Cryptocurrency Market

School of Mathematical Sciences
Universiti Sains Malaysia
11800 Minden, Penang, MALAYSIA.

suleimandm2017@gmail.com

School of Mathematical Sciences
Universiti Sains Malaysia
11800 Minden, Penang, MALAYSIA.

m.tahir@usm.my

School of Mathematical Sciences
Universiti Sains Malaysia
11800 Minden, Penang, MALAYSIA.

majidkhanmajaharali@usm.my

Abstract

This paper aims to compare the empirical performance of two approaches in detecting structural breaks and outliers due to the significant frequent price changes seen in cryptocurrencies. The two approaches are indicator saturation (IS) and Bai and Perron (BP). The cryptocurrency data employed in this study are Bitcoin and Ethereum. In comparing the performance of the two  approaches, this study performed multiple empirical comparisons using various significant levels, different data frequencies, as well as the original and log series (price). The findings showed that the prices contained structural breaks and outliers and that the IS approach performed significantly better than the BP test in terms of the identified structural breaks as well as outliers across different settings. The contribution of this study is providing empirical comparisons between IS and BP approaches using cryptocurrency data. These findings are important to the potential stakeholders, in particular,  for quality control in industries, for setting price targets, and for confirming trading signals to reduce potential losses.

Keywords

Bai and Perron; cryptocurrency; indicator saturation; outliers; structural breaks

JEL Codes

C12, C18, C22, C58, C87, G10
Jurnal Ekonomi Malaysia http://dx.doi.org/10.17576/JEM-2023-5702-08
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Bibliography

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Mohamed, S. D., Ismail, M. T., & Majahar Ali, M. K. (2023). Detecting Structural Breaks in Cryptocurrency Market. Jurnal Ekonomi Malaysia, 57(2), 107–122. Jurnal Ekonomi Malaysia http://dx.doi.org/10.17576/JEM-2023-5702-08

@article{mohamed2023detecting,
  title={Detecting Structural Breaks in Cryptocurrency Market},
  author={Mohamed, Suleiman Dahir and Ismail, Mohd Tahir and Majahar Ali, Majid Khan},
  journal={Jurnal Ekonomi Malaysia},
  volume={57},
  number={2},
  pages={107—122},
 

year={2023},
}

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