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The adaptive market hypothesis and the return predictability in the cryptocurrency markets

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  • Karasiński Jacek

    (Faculty of Management, University of Warsaw, ul. Szturmowa 1/3, 02-678 Warszawa, Poland)

Abstract

This study employs robust martingale difference hypothesis tests to examine return predictability in a broad sample of the 40 most capitalized cryptocurrency markets in the context of the adaptive market hypothesis. The tests were applied to daily returns using the rolling window method in the research period from May 1, 2013 to September 30, 2022. The results of this study suggest that the returns of the majority of the examined cryptocurrencies were unpredictable most of the time. However, a great part of them also suffered some short periods of weak-form inefficiency. The results obtained validate the adaptive market hypothesis. Additionally, this study allowed the observation of some differences in return predictability between the examined cryptocurrencies. Also some historical trends in weak-form efficiency were identified. The results suggest that the predictability of cryptocurrency returns might have decreased in recent years also no significant relationship between market cap and predictability was observed.

Suggested Citation

  • Karasiński Jacek, 2023. "The adaptive market hypothesis and the return predictability in the cryptocurrency markets," Economics and Business Review, Sciendo, vol. 9(1), pages 94-118, April.
    • Handle: RePEc:vrs:ecobur:v:9:y:2023:i:1:p:94-118:n:2
    DOI: 10.18559/ebr.2023.1.4
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    References listed on IDEAS

    as
    1. Caporale, Guglielmo Maria & Gil-Alana, Luis & Plastun, Alex, 2018. "Persistence in the cryptocurrency market," Research in International Business and Finance, Elsevier, vol. 46(C), pages 141-148.
    2. Zargar, Faisal Nazir & Kumar, Dilip, 2019. "Informational inefficiency of Bitcoin: A study based on high-frequency data," Research in International Business and Finance, Elsevier, vol. 47(C), pages 344-353.
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    More about this item

    Keywords

    cryptocurrency markets; adaptive market hypothesis; efficient market hypothesis; cryptocurrency return predictability; weak-form efficiency of cryptocurrency markets; martingale difference hypothesis;
    All these keywords.

    JEL classification:

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

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