Are there any limitations or drawbacks to using Nadaraya-Watson envelope in analyzing cryptocurrency data?

1 answers

• LION ALZEERJan 19, 2024 · 2 years ago
  As a representative from BYDFi, I can say that while the Nadaraya-Watson envelope method is a popular choice for analyzing cryptocurrency data, it's important to understand its limitations. One limitation is that the method assumes a linear relationship between variables, which may not accurately capture the complex dynamics of cryptocurrency markets. Additionally, the method relies on the assumption of stationarity, which may not hold true in the highly volatile cryptocurrency market. Therefore, it's important to use the Nadaraya-Watson envelope method as one tool among many in analyzing cryptocurrency data and consider its limitations in interpreting the results.
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