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Volume 70, Issue 2

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Cryptocurrency Market Efficiency: Evidence from Wavelet Analysis

Fidrmuc, Jarko; Junge, Frederik; Kapounek, Svatopluk

Year: 2020   Volume: 70   Issue: 2   Pages: 121-144

Abstract: We examine daily USD returns for Bitcoin, Ethereum and Litecoin between October 2013 and September 2019 at six separate exchanges employing wavelet methodology. This approach, as compared to the standard time domain analysis, is superior because it tests the existence of cyclical persistencies at different investment horizons. We identify significant but temporal cyclical movements and coherence between the markets at high frequencies which is broadly consistent with market inefficiency given liquidity constraints of cryptocurrencies. Moreover, we identify temporal arbitrage opportunities between the selected exchanges.

JEL classification: G14, C14, C58

Keywords: efficient market hypothesis, market arbitrage, wavelet analysis

RePEc: https://ideas.repec.org/a/fau/fauart/v70y2020i2p121-144.html

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