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Cryptocurrency Market Efficiency: Evidence from Wavelet Analysis

Author

Listed:
  • Jarko Fidrmuc

    (Zeppelin University Friedrichshafen, Friedrichshafen, Germany
    Mendel University, Brno, Czech Republic)

  • Svatopluk Kapounek

    (Mendel University in Brno, Brno, Czech Republic)

  • Frederik Junge

    (Zeppelin University Friedrichshafen, Friedrichshafen, Germany)

Abstract

We examine daily USD returns for Bitcoin, Ethereum and Litecoin between October 2013 and September 2019 at six separate exchanges employing wavelet methodology. This approach, as compared to the standard time domain analysis, is superior because it tests the existence of cyclical persistencies at different investment horizons. We identify significant but temporal cyclical movements and coherence between the markets at high frequencies which is broadly consistent with market inefficiency given liquidity constraints of cryptocurrencies. Moreover, we identify temporal arbitrage opportunities between the selected exchanges.

Suggested Citation

  • Jarko Fidrmuc & Svatopluk Kapounek & Frederik Junge, 2020. "Cryptocurrency Market Efficiency: Evidence from Wavelet Analysis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(2), pages 121-144, August.
    • Handle: RePEc:fau:fauart:v:70:y:2020:i:2:p:121-144
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1457
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    Citations

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    Cited by:

    1. Dejan Živkov & Slavica Manić & Jelena Kovačević & Željana Trbović, 2022. "Assessing volatility transmission between Brent and stocks in the major global oil producers and consumers – the multiscale robust quantile regression," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(1), pages 67-93, January.
    2. Horky, Florian & Rachel, Carolina & Fidrmuc, Jarko, 2022. "Price determinants of non-fungible tokens in the digital art market," Finance Research Letters, Elsevier, vol. 48(C).

    More about this item

    Keywords

    efficient market hypothesis; market arbitrage; wavelet analysis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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