Market efficiency assessmentfor multiple exchangesof cryptocurrencies
DOI:
https://doi.org/10.1108/REGE-05-2022-0070Keywords:
Cryptocurrencies, Efficient market hypothesis, Vector autoregressionAbstract
Purpose: To analyze the Efficient Market Hypothesis (EMH) of cryptocurrencies on multiple platforms by observing whether there is a discrepancy in the levels of efficiency between the different exchanges. Additionally, EMH is tested in a multivariate way: whether the prices of the same cryptocurrencies traded on different exchanges are temporally related to each other.
Design/methodology/approach: For univariate series, the Random Walk hypothesis is evaluated by using ADF and KPSS tests, whereas the vector autoregression model of order p –VAR(p)– for multivariate system.
Findings: Both Bitcoin and Ethereum show efficiency in the weak form on the main platforms in each market alone. However, when estimating a VAR(p) between prices among exchanges, there was evidence of Granger causality between cryptocurrencies in all exchanges, suggesting that EMH is not adequate due to cross information.
Practical implications: It is essential to assess the cryptocurrency market in a multivariate way, not only to favor its maturation process, but also to promote a broad understanding of its inherent risks. Thus, it will be possible to develop financial products that are actively managed in a more sophisticated cryptocurrency market.
Social implications: There is the possibility of performing arbitrage on different exchanges and market assets through cross-exchanges. Thus, emphasizing the need for regulation of exchanges in the digital asset market, as an eventual price manipulation on a single platform can impact others, which generates various distortions.
Originality/value: This study is the first to find evidence of cross-information for the same (and other) cryptocurrencies among different exchanges.
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References
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