A singular value decomposition approach for testing the efficiency of Bitcoin and Ethereum markets

Jose Alvarez-Ramirez and Eduardo Rodriguez

Economics Letters, 2021, vol. 206, issue C

Abstract: This letter revisits the informationally efficiency of the two major cryptocurrencies Bitcoin (2013–2021) and Ethereum (2016–2021). The analysis is based on the computation of the singular value decomposition (SVD) entropy of a matrix formed by lagged vectors of price returns. The computed entropy is compared with a reference obtained from uncorrelated time series to decide whether the rows of the lagged matrix are uncorrelated. The procedure was implemented over a sliding window to assess the time variations of the entropy. The results show that the markets are informationally efficient most of time over different scales, except for some short periods that are linked to the 2016–2017 price-boom period and the 2020 Covid-19 economic downturn.

Keywords: Cryptocurrencies; Market efficiency; Entropy; Singular value decomposition (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002743

DOI: 10.1016/j.econlet.2021.109997

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