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Nothing but noise? Price discovery across cryptocurrency exchanges

Author

Listed:
  • Dimpfl, Thomas
  • Peter, Franziska J.

Abstract

We examine the price discovery contributions of cryptocurrency exchanges in the presence of market microstructure noise. Cryptocurrency markets exhibit a decisively higher level of microstructure noise compared with the NYSE or NASDAQ. Therefore, traditional measures of price discovery could be biased. To overcome this concern, we draw on the information leadership share proposed by Putniņš (2013); by leveraging this information, we find that Bitfinex is the leader in the price discovery process. These results highlight the importance of accounting for different levels of noise when evaluating price discovery contributions.

Suggested Citation

  • Dimpfl, Thomas & Peter, Franziska J., 2021. "Nothing but noise? Price discovery across cryptocurrency exchanges," Journal of Financial Markets, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finmar:v:54:y:2021:i:c:s1386418120300537
    DOI: 10.1016/j.finmar.2020.100584
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    References listed on IDEAS

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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