Open AccessBitcoin and the South Sea Company: A comparative analysis
Author(s) -
Michael Demmler,
Amilcar Orlian Fernández Domínguez
Publication year - 2021
Publication title -
revista finanzas y política económica/revista finanzas y política económica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.121
H-Index - 3
eISSN - 2248-6046
pISSN - 2011-7663
DOI - 10.14718/revfinanzpolitecon.v13.n1.2021.9
Subject(s) - skewness , economic bubble , bubble , descriptive statistics , econometrics , economics , autoregressive model , financial economics , asset (computer security) , standard deviation , series (stratigraphy) , order (exchange) , crash , time series , statistics , mathematics , monetary economics , finance , computer science , geology , paleontology , computer security , parallel computing , programming language
This paper examines historical Bitcoin price data together with the price data of a well-known and generally accepted historical asset price bubble (the 1720 South Sea Bubble) with the aim of identifying possible similarities. In order to find empirical evidence of speculative bubble tendencies, the article analyses distribution moments and autoregressive models of time series of both assets. Results show that historical daily prices of both assets—taking into account one year before and one year after the maximum price level—clearly show the two phases of bubble expansion and subsequent crash. Furthermore, various similarities between the South Sea Bubble and Bitcoin can be found in descriptive statistics, such as mean of return, standard deviation, and skewness. Statistical tests also show several explosive moments in the time series of the South Sea Company and Bitcoin returns, which implies that both assets exhibit more than one financial bubble.