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Pricing efficiency and asymmetric multifractality of major asset classes before and during COVID-19 crisis

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  • Mensi, Walid
  • Sensoy, Ahmet
  • Vo, Xuan Vinh
  • Kang, Sang Hoon

Abstract

We examine the impact of COVID-19 pandemic crisis on the pricing efficiency and asymmetric multifractality of major asset classes (S&P500, US Treasury bond, US dollar index, Bitcoin, Brent oil, and gold) within a dynamic framework. Applying permutation entropy on intraday data that covers between April 30, 2019 and May 13, 2020, we show that efficiency of all sample asset classes is deteriorated with the outbreak, and in most cases this deterioration is significant. Results are found to be robust under different analysis schemes. Brent oil is the highest efficient market before and during crisis. The degree of efficiency is heterogeneous among all markets. The analysis by an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach shows evidence of asymmetric multifractality in all markets which rise with the scales. The inefficiency is higher during downward trends before the pandemic crisis as well as during COVID-19 except for gold and Bitcoin. Moreover, the pandemic intensifies the inefficiency of all markets except Bitcoin. Findings reveal increased opportunities for price predictions and abnormal returns gains during the COVID-19 outbreak.

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  • Mensi, Walid & Sensoy, Ahmet & Vo, Xuan Vinh & Kang, Sang Hoon, 2022. "Pricing efficiency and asymmetric multifractality of major asset classes before and during COVID-19 crisis," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:ecofin:v:62:y:2022:i:c:s1062940822001152
    DOI: 10.1016/j.najef.2022.101773
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    References listed on IDEAS

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    Cited by:

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    2. Foued Sa^adaoui, 2023. "Structured Multifractal Scaling of the Principal Cryptocurrencies: Examination using a Self-Explainable Machine Learning," Papers 2304.08440, arXiv.org.

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    More about this item

    Keywords

    Efficient market hypothesis; COVID-19; Permutation entropy; A-MF-DFA; Predictability;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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