A distribution‐based method to gauge market liquidity through scale invariance between investment horizons

Bianchi, Sergio; Pianese, Augusto; Frezza, Massimiliano

doi:10.1002/asmb.2531

Cited by 6 publications

(4 citation statements)

References 33 publications

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“…The extreme fluctuations coupled with large descending price movements showcase that the market structure changed considerably such that the market equilibrium was no longer existing during COVID times (Bianchi et al (2020). Such a trend in the financial markets begins with the irrational behavior of market participants which exacerbates with more negative sentiments in the market.…”

Section: Empirical Findingsmentioning

confidence: 99%

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On the (In)efficiency of gold and bitcoin: impact of COVID-19

Kumar

2024

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PurposeWe aim to examine the impact of COVID-19 on the efficiency of Gold and Bitcoin returns. In particular, our efficiency tests are based on the popular calendar anomaly, the turn-of-the-month (TOM) effect in these markets.Design/methodology/approachWe define the TOM days as the final trading day of a month and initial three trading days of the immediate next month. To understand the TOM effect, we estimate the typical Ordinary Least Squares (OLS) regression model using the Heteroskedasticity and Autocorrelation Consistent (HAC) standard errors and covariances.FindingsThough in the full sample, a positive and significant TOM effect is observed only for Bitcoin, during COVID period, the TOM effect appears in Gold returns and becomes stronger for Bitcoin, implying that the considered securities become inefficient during COVID period.Practical implicationsBased on these results, we create a trading strategy which is found to surpass the buy-and-hold strategy for both the full sample as well as the COVID period for Bitcoin while only during the COVID period for Gold. Our results provide useful implications for investors and policymakers as the Gold and Bitcoin markets can be timed by taking positions especially based on the behavior of the TOM effect.Originality/valueWe examine the TOM effect in the two important securities – Gold and Bitcoin. Though, a few studies have examined this anomaly in currency, equity and cryptocurrency markets, however, they have not considered the Gold market. Additionally, no study has examined the impact of COVID-19 on the TOM effect in these markets, and hence, market efficiency. We believe that our study is the first to examine the TOM effect in these markets simultaneously.

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Section: Empirical Findingsmentioning

confidence: 99%

Section: Empirical Findingsmentioning

confidence: 99%

On the (In)efficiency of gold and bitcoin: impact of COVID-19

Kumar

2024

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“…( 2) would state that the 𝑎-lagged log-change distributes as 𝑎 𝐻 0 times the one-lag log-change, provided of course that the returns form a self-similar sequence. This scaling property has relevant implications, for example to assess dynamically the liquidity of the market [18].…”

Section: Self-similar Stochastic Processesmentioning

confidence: 99%

Rough Volatility Via the Lamperti Transform

Bianchi¹,

Angelini²,

Pianese

et al. 2023

Preprint

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“…The spikes of volatility along with large downward price movements are clear symptoms that market structure is suddenly changing, in the sense that the distribution of the trading strategies among the different time horizons is no longer capable to balance the excess of short positions opened by traders on a single or multiple investment horizons. This causes prices to fall and volatility to burst, Bianchi et al. (2020) .…”

Section: Introductionmentioning

confidence: 99%