Title

Market efficiency of cryptocurrency: long term memory effect in bitcoin trading

Abstract/Description

Cryptocurrency market has attracted interest of both researchers and investors. It is a comparatively newer mode of transactions; therefore, both the agents are interested in the movement of these currencies in terms of volatility and profit. This research makes an effort to examine these phenomena with the help of long-range memory in the Bitcoin market using Generalized Hurst exponent methodology. For this purpose, the daily dataset spanning from 26th August 2010 to 19th April 2018 is collected, prepared and analyzed. Findings reveal interesting facts that the Hurst exponents for almost every year are above 0.5, and the long-range dependence is present in the Bitcoin market. This shows that the Bitcoin market exhibits strong persistence level hence the market is inefficient and investors should not enter the market speculatively due to its high risk. Our findings have implications for policy-makers and investors for making prudent decisions while investing in emerging markets like Bitcoin. Moreover, the researchers are also provided with an insight of Bitcoin market, and directions for future research.

Track

Accounting, Law, and Finance

Session Number/Theme

Session 3B: Accounting, Finance & Law

Session Chair

Dr. Sana Tauseef, Institute of Business Administration, Karachi

Session Discussant

Sohaib Ahmed; Zaira Anees; Dr. Fawad Ahmad; Dr. Tasawar Nawaz

Start Date/Time

24-6-2022 2:00 PM

End Date/Time

24-6-2022 2:20 PM

Location

Training Room 3, Marriott Hotel, Karachi

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Jun 24th, 2:00 PM Jun 24th, 2:20 PM

Market efficiency of cryptocurrency: long term memory effect in bitcoin trading

Training Room 3, Marriott Hotel, Karachi

Cryptocurrency market has attracted interest of both researchers and investors. It is a comparatively newer mode of transactions; therefore, both the agents are interested in the movement of these currencies in terms of volatility and profit. This research makes an effort to examine these phenomena with the help of long-range memory in the Bitcoin market using Generalized Hurst exponent methodology. For this purpose, the daily dataset spanning from 26th August 2010 to 19th April 2018 is collected, prepared and analyzed. Findings reveal interesting facts that the Hurst exponents for almost every year are above 0.5, and the long-range dependence is present in the Bitcoin market. This shows that the Bitcoin market exhibits strong persistence level hence the market is inefficient and investors should not enter the market speculatively due to its high risk. Our findings have implications for policy-makers and investors for making prudent decisions while investing in emerging markets like Bitcoin. Moreover, the researchers are also provided with an insight of Bitcoin market, and directions for future research.