Liquidity and Information Efficiency in Cryptocurrencies Market

Subject Areas : Journal of Investment Knowledge

Mohammad  Salehifar ¹ (PhD. Student in Finance, Management and Economics Faculty, Science and Research Branch of Islamic Azad University, Tehran.)

Received: 2018-12-11 Accepted : 2019-03-02 Published : 2021-09-23

Keywords: information efficiency, Return Predictability, cryptocurrency, liquidity,

Abstract :

In this paper, we evaluate the behavior of return, liquidity, and information efficiency in cryptocurrencis market. Cryptocurrencis are a kind of virtual currencies which cryptography technology is a basic element in their designing. They are often managed in an undistributed manner. The sample consists of 13 cryptocurrencies which were traded during 3 years (11/1/2015 until 11/1/2018) consistently. We apply Dickey-Fuller test, Ljung-Box autocorrelation parametric test, Fama-French autocorrelation test, Run and Hurst non-parametric tests to explore momentum and long-run memory in cryptocurrencis market. Findings show that cryptocurrencis return has an unpredictable behavior in markets which are more liquid. Indeed, liquidity has a direct relationship with information efficiency in cryptocurrencis market. Totally, the more liquid cryptocurrencis markets are, the less return predictability will be happened and cryptocurrencis return time series will move to a random walk. Therefore, the efficient market hypothesis will be improved.

References:

• جلایی، سیدعبدالمجید؛ میر، هدیه؛ رحیمی پور، اکبر، بررسی تاثیر عبور نرخ ارز بر بازدهی سهام در بورس اوراق بهادار تهران، 1395، فصلنامـه علمی-پژوهشی دانش سرمایه­گـذاری، 5 (19)، 191-212.


• خوشبخت، سعید و عباسی، حجت، پیشنهاد مدل رگولاتوری رمزارز درکشور باتوجه به رویکردهای رگولاتوری جهانی، ۱۳۹۶، هفتمین همایش ملی بانکداری الکترونیک ونظام­های پرداخت، تهران، پژوهشکده پولی و بانکی.


• سلیمانی­پور، محمد مهدی؛ سلطانی‌نژاد، حامد؛ پورمطهر، مهدی، بررسی فقهی پول مجازی، ۱۳۹6، دوفصلنامه علمی-پژوهشی تحقیقات مالی اسلامی، 6(2), 167-192.


• صیادمعروف، محمدرسول؛ طوفان­زاده مژدهی، علی؛ رشیدی، حسن، واحد پول دیجیتالی بیت کوین و نقش آن در تجارت الکترونیک، ۱۳۹۴، دومین کنفرانس بین المللی پژوهش در علوم و تکنولوژی، ترکیه.


• مصلح شیرازی، علی نقی؛ موسوی حقیقی، محمد هاشم؛ پشوتنی­زاده، هومن، شبیه‏ سازی الگوی تغییرات نرخ ارز و قیمت طلا بر عملکرد بورس اوراق بهادار تهران با رویکرد پویایی‏ شناسی سیستمی، 1397، فصلنامـه علمی-پژوهشی دانش سرمایه­گـذاری، 7 (25)، 17-38.


• Amihud, Y. (2002) Illiquidity and stock returns: cross-section and time-series effects, Journal of Financial Markets, 5, 31-56


• Amihud, Y. and H. Mendelson (1986) Asset pricing and the bid-ask spread, Journal of Financial Economics, 17, 223-249.


• Ammous, S. (2018) Can cryptocurrencies fulfil the functions of money?, The Quarterly Review of Economics and Finance, https://doi.org/10.1016/j.qref.2018.05.010.


• Baeck, C. and M. Elbeck (2015) Bitcoins as an investment or speculative vehicle? A first look, Applied Economics Letters, 22, 30-34


• Bartels, R. (1982) The rank version of von Neumann’s ratio test for randomness, Journal of American Statistical Association, 77 (377), 40-46.


• Dyhrberg, A.H. (2015) Bitcoin, gold and the dollar – A GARCH volatility analysis, Finance Research Letters, http://dx.doi.org/10.1016/j.frl.2015.10.008.


• Grinberg, R. (2012) Bitcoin: an alternative digital currency, Hastings Science and Technology.


• Ljung, G.M. and G.E.P. Box (1978) On a measure of the lack of fit in time series models, Biometrika, 65(2), 297-303.


• Nakamoto, S. (2008) Bitcoin: A Peer-to-Peer Electronic Cash System, original paper.


• Peterson, T. (2018) Metcalfe’s law as a model for Bitcoin’s value, Economics Letters, 165(2), 70-72.


• Selgin, G. (2015) Synthetic commodity money, Journal of Financial Stability, 17, 92-99.


• Troster, , Tiwari, A.K., Shahbaz,M., and Macedo, D.N. (2018) Bitcoin Returns and Risk: A General GARCH and GAS Analysis, Finance Research Letters (2018), doi: https://doi.org/10.1016/j.frl.2018.09.014


• Urquhart, A. (2016) The inefficiency of Bitcoin, Economics Letters, 148, 80-82.


• Van Vliet, B. (2018) An Alternative Model of Metcalfe’s Law for Valuing Bitcoin, Economics Letters, forthcoming.


• Wei W.C., (2018) Liquidity and market efficiency in cryptocurrencies. Economics Letters, https://doi.org/10.1016/j.econlet.2018.04.003