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Nothing but noise? Price discovery across cryptocurrency exchanges

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  • 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.

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  • 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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    Cited by:

    1. Huang, Guan-Ying & Gau, Yin-Feng & Wu, Zhen-Xing, 2022. "Price discovery in fiat currency and cryptocurrency markets," Finance Research Letters, Elsevier, vol. 47(PA).
    2. M. Eren Akbiyik & Mert Erkul & Killian Kaempf & Vaiva Vasiliauskaite & Nino Antulov-Fantulin, 2021. "Ask "Who", Not "What": Bitcoin Volatility Forecasting with Twitter Data," Papers 2110.14317, arXiv.org, revised Dec 2022.
    3. Naheeda Ali, 2022. "Crimes Related to Cryptocurrency and Regulations to Combat Crypto Crimes," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 289-302, September.
    4. Bao Doan & Huy Pham & Binh Nguyen Thanh, 2022. "Price discovery in the cryptocurrency market: evidence from institutional activity," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(1), pages 111-131, March.
    5. Koch, Sophia & Dimpfl, Thomas, 2023. "Attention and retail investor herding in cryptocurrency markets," Finance Research Letters, Elsevier, vol. 51(C).
    6. Jinxin Cui & Aktham Maghyereh, 2022. "Time–frequency co-movement and risk connectedness among cryptocurrencies: new evidence from the higher-order moments before and during the COVID-19 pandemic," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-56, December.
    7. Yu‐Lun Chen & J. Jimmy Yang, 2024. "Time‐varying price discovery in regular and microbitcoin futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(1), pages 103-121, January.

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    More about this item

    Keywords

    Price discovery; Cryptocurrency; Bitcoin; Information share; Microstructure noise;
    All these keywords.

    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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