Market Inefficiency in Cryptoasset Markets

Joel Hasbrouck, Julian Ma, Fahad Saleh and Caspar Schwarz-Schilling

Papers from arXiv.org

Abstract: We demonstrate market inefficiency in cryptoasset markets. Our approach examines investments that share a dominant risk factor but differ in their exposure to a secondary risk. We derive equilibrium restrictions that must hold regardless of how investors price either risk. Our empirical results strongly reject these necessary equilibrium restrictions. The rejection implies market inefficiency that cannot be attributed to mispriced risk, suggesting the presence of frictions that impede capital reallocation.

Date: 2026-02
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