Good and bad self-excitation: Asymmetric self-exciting jumps in Bitcoin returns

Recent studies find jumps in cryptocurrencies such as Bitcoin, however, little is known about the behavior of self-exciting jump clustering. Using high frequency data, we investigate the characteristics of self-exciting jumps in Bitcoin returns. First, we find strong asymmetry in self-excitation, which is triggered, on average, more by bad (negative) jumps than good (positive) jumps. Second, when discriminating bear and bull markets, we find negative asymmetry in bear markets but no evidence of positive asymmetry in bull markets. Third, self-excitation has asymmetric aftershock effects, where aftershocks triggered by bad self-excitation are more persistent than aftershocks triggered by good self-excitation. The findings presented in this paper have important implications in risk management and asset pricing for Bitcoin.