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Fractional cointegration in bitcoin spot and futures markets

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  • Jinghong Wu
  • Ke Xu
  • Xinwei Zheng
  • Jian Chen

Abstract

This paper adopts the fractional cointegrated vector autoregressive (FCVAR) model to examine high‐frequency price discovery of bitcoin spot and futures prices from December 18, 2017 to July 31, 2020. We find that bitcoin spot and futures prices exhibit long memory properties and they are fractionally cointegrated. The result shows that the bitcoin futures market dominates the price discovery process. Interestingly, during the Covid‐19 pandemic, the bitcoin price discovery leadership has switched to the spot market. Moreover, we find that the bitcoin futures market follows a long‐run contango. The nonfractional CVAR model overestimates the price discovery of the futures market.

Suggested Citation

  • Jinghong Wu & Ke Xu & Xinwei Zheng & Jian Chen, 2021. "Fractional cointegration in bitcoin spot and futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(9), pages 1478-1494, September.
    • Handle: RePEc:wly:jfutmk:v:41:y:2021:i:9:p:1478-1494
    DOI: 10.1002/fut.22216
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    References listed on IDEAS

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    4. Liwei Jin & Xianghui Yuan & Li Peiran & Hailun Xu & Feng Lian, 2023. "Option features and price discovery in convertible bonds," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(3), pages 384-403, March.
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    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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