Market efficiency of the bitcoin exchange rate: Weak and semi-strong form tests with the spot, futures and forward foreign exchange rates

Nan, Zheng; Kaizoji, Taisei

doi:10.1016/j.irfa.2019.06.003

Cited by 35 publications

(19 citation statements)

References 19 publications

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“…Thus, the Bitcoin market can be manipulated and used as an investing option for profit. This finding is partially in line with previous findings on market efficiency in the Bitcoin market (e.g., Vidal-Tomás and Ibañez, 2018;Nan and Kaizoji, 2019).…”

Section: Empirical Findingssupporting

confidence: 92%

Forecasting Bitcoin returns: is there a role for the US–China trade war?

Plakandaras¹,

Bouri²,

Gupta³

2021

JOR

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Previous studies provide evidence that trade related uncertainty tends to predict an increase in Bitcoin returns. In this paper, we extend the related literature by examining whether the information on the U.S. -China trade war can be used to forecast the future path of Bitcoin returns controlling for various explanatory variables. We apply ordinary least square (OLS) regression, support vector regression (SVR), and the least absolute shrinkage and selection operator (LASSO) techniques that stem from the field of machine learning, and find weak evidence of the role of the trade war in forecasting Bitcoin returns. Given that out-of-sample tests are more reliable than in-sample tests, our results tend to suggest that future Bitcoin returns are unaffected by trade related uncertainties, and investors can use Bitcoin as a safe haven in this context.

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Section: Empirical Findingssupporting

confidence: 92%

Forecasting Bitcoin returns: is there a role for the US–China trade war?

Plakandaras¹,

Bouri²,

Gupta³

2021

JOR

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“…In 2009, the Multifractal Detrended Fluctuation was proposed by Kantelhardt to determine the statistical characteristics of the stochastic series over different time scales (Winsor, 1995).Recent studies have focused on the weak-form efficiency by employing market fractal theory (Han et al, 2019). This theory was, also, applied to Bitcoin to assess the semi-strong and weak form efficiency (Nan and Kaizoji, 2019). Furthermore, this approach was investigated to determine the dynamic efficiency during catastrophic events (Sensoy and Tabak, 2016).…”

Section: State Of the Artmentioning

confidence: 99%

“…Recent studies have focused on the weak-form efficiency by employing market fractal theory (Han et al , 2019). This theory was, also, applied to Bitcoin to assess the semi-strong and weak form efficiency (Nan and Kaizoji, 2019). Furthermore, this approach was investigated to determine the dynamic efficiency during catastrophic events (Sensoy and Tabak, 2016).…”

Section: State Of the Artmentioning

confidence: 99%

COVID-19, bitcoin market efficiency, herd behaviour

Mnif

Jarboui

2021

RBF

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PurposeUnlike previous crisis where investors tend to put their assets in safe havens like gold, the recent coronavirus pandemic is characterised by an increase in the Bitcoin purchasing described as risk heaven. This paper aims to analyse the Bitcoin dynamics and the investor response by focusing on herd biases. Therefore, the main objective of this work is to study the degree of efficiency through multifractal analysis in order to detect herd behaviour leading to build the best predictions and strategies.Design/methodology/approachThis paper develops a novel methodology that detects the presence of herding biases and assesses the inefficiency of Bitcoin through an inefficiency index (MLM) by using statistical indicators defined by measures of persistence. This study, also, investigates the nonlinear dynamical properties of Bitcoin by estimating the Multifractal Detrended Fluctuation Analysis (MFDFA) leading to deduce the effect of COVID-19 on the Bitcoin performance. Besides, this work performs an event study to capture abnormal changes created by COVID-19 related events capable to analyse the Bitcoin market response.FindingsThe empirical results of the generalized Hurst exponent GHE estimation indicates that Bitcoin is multifractal before this pandemic and becomes less fractal after the outbreak. Using an efficiency index (MLM), Bitcoin is found to be more efficient after the pandemic. Based on the Hausdorff topology, the authors showed that this pandemic has reduced the herd bias.Research limitations/implicationsThe uncertainty of COVID-19 disease and the lasting of its duration make it difficult to make the best prediction.Practical implicationsThe main contribution of this study is the evaluation of the Bitcoin value after the COVID19 outbreak. This work has practical implications as it provides new insights on trading opportunities and social reactions.Originality/valueTo the authors’ knowledge, this work represents the first study that analyses the Bitcoin response to different events related to COVID-19 and detects the presence of herding behaviour in such a crisis.

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“…Çıtak, Akel, and Çetin (2016) examine the hypothesis of an efficient market, in its weak form, in turkey's foreign exchange markets, and show that the random walk hypothesis is rejected for the nominal exchange rate TRY/USD from January 2000 to December 2013. Nan and Kaizoji (2019), Njindan Iyke (2019), Chaudhry et al (2019) tested the random walk hypothesis in international foreign exchange markets. Nan and Kaizoji (2019) suggested a bitcoin-based USD/EUR exchange rate and investigated the random walk hypothesis in the spot and future markets.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Nan and Kaizoji (2019), Njindan Iyke (2019), Chaudhry et al (2019) tested the random walk hypothesis in international foreign exchange markets. Nan and Kaizoji (2019) suggested a bitcoin-based USD/EUR exchange rate and investigated the random walk hypothesis in the spot and future markets. Structural change tests, unit root and Johansen indicate that the bitcoin exchange rate follows the random walk hypothesis and is integrated with the FX series.…”

Section: Literature Reviewmentioning

confidence: 99%

Market Efficiency in Its Weak Form: The Pre-Covid and Covid Indonesia Analysis

Dias¹,

Heliodoro²,

Alexandre³

et al. 2021

International Scientific Conference EMAN – Economics and Management: How to Cope With Disrupted Times

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This essay aims to analyze the efficiency, in its weak form, in the Exchange Markets IDR/MYR (Indonesia-Malaysia), IDR/PHP (Indonesia-Philippines), IDR/SGD (Indonesia-Singapore), IDR/THB (Indonesia-Thailand), IDR/GBP (Indonesia-UK), IDR/US (Indonesia-USA), IDR/EUR (Indonesia-Euro Zone/Europe). The sample comprises the period from September 3, 2018, to October 20, 2020, and the sample was partitioned into two subperiods: Pre-Covid and Covid. To carry out this analysis, different approaches were undertaken to assess whether: (i) the global pandemic promoted in(efficiency) in the exchange rates of Indonesia vs Malaysia, Philippines, Singapore, Thailand, UK, USA, Eurozone? The results suggest that in the Pre-Covid subperiod we can see that the random walk hypothesis is rejected, IDR/MYR (0.61), IDR/SGD (0.60), IDR/US (0.59), IDR/THB (0.56), IDR/EUR (0.55), IDR/GBP (0.54), except for the IDR/PHP pair (0.45) which evidences anti persistence. Already in the Covid period, we noticed that persistence increased significantly, like followed, IDR/EUR (0.82), IDR/PHP (0.81) IDR/SGD (0.80), IDR/US (0.80), IDR/MYR (0.78), IDR/THB (0.71), IDR/GBP (0.62). These findings show high levels of arbitrage, i.e., investors will be able to obtain abnormal profitability without incurring the additional risk, which could jeopardize the implementation of efficient portfolio diversification strategies due to market imbalance. The authors believe that these findings can help policymakers formulate a comprehensive response to improve the efficiency of the foreign exchange market during a global pandemic event.

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Market efficiency of the bitcoin exchange rate: Weak and semi-strong form tests with the spot, futures and forward foreign exchange rates

Cited by 35 publications

References 19 publications

Forecasting Bitcoin returns: is there a role for the US–China trade war?

Forecasting Bitcoin returns: is there a role for the US–China trade war?

COVID-19, bitcoin market efficiency, herd behaviour

Market Efficiency in Its Weak Form: The Pre-Covid and Covid Indonesia Analysis

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