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Calendar Anomaly and the Degree of Market Inefficiency of Bitcoin

Author

Listed:
  • S. Raja Sethu Durai

    (Associate Professor, School of Economics, University of Hyderabad, Hyderabad-500046, India)

  • Sunil Paul

    (Assistant Professor, Madras School of Economics)

Abstract

We find evidence for a day of the week calendar anomaly in Bitcoin returns and argue that not considering this anomaly results in a biased estimate of the market efficiency. Further, it also quantifies the degree of market inefficiency of Bitcoin over time using the methodology proposed by Ito and Sugiyama (2009) and found evidence in favor of very high degree of market inefficiency for the period spanning from July 2010 to January 2018. This result contradicts some of the recent studies that argue in favor of the market efficiency of Bitcoin

Suggested Citation

  • S. Raja Sethu Durai & Sunil Paul, 2018. "Calendar Anomaly and the Degree of Market Inefficiency of Bitcoin," Working Papers 2018-168, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2018-168
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    File URL: https://www.mse.ac.in/wp-content/uploads/2021/05/Working-Paper-168.pdf
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    References listed on IDEAS

    as
    1. Cheah, Eng-Tuck & Fry, John, 2015. "Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin," Economics Letters, Elsevier, vol. 130(C), pages 32-36.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    3. Dyhrberg, Anne Haubo, 2016. "Hedging capabilities of bitcoin. Is it the virtual gold?," Finance Research Letters, Elsevier, vol. 16(C), pages 139-144.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Nuray Tosunoğlu & Hilal Abacı & Gizem Ateş & Neslihan Saygılı Akkaya, 2023. "Artificial neural network analysis of the day of the week anomaly in cryptocurrencies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    2. Yaya, OlaOluwa S & Ogbonna, Ephraim A, 2019. "Do we Experience Day-of-the-week Effects in Returns and Volatility of Cryptocurrency?," MPRA Paper 91429, University Library of Munich, Germany.

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    More about this item

    Keywords

    Bitcoin; Level of inefficiency; State-space model;
    All these keywords.

    JEL classification:

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

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