Liquidity and Information Efficiency in Cryptocurrencies Market

Subject Areas : Journal of Investment Knowledge

Mohammad Salehifar ¹

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.

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