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
DOI: https://doi.org/10.32065/CJEF.2020.02.02
RePEc: https://ideas.repec.org/a/fau/fauart/v70y2020i2p121-144.html
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