An analysis of price discovery between Bitcoin futures and spot markets

Burcu Kapar and Jose Olmo

Economics Letters, 2019, vol. 174, issue C, 62-64

Abstract: This paper analyzes the Bitcoin price discovery process. We collect data on futures and spot prices for the period December 2017 to May 2018 and compute Hasbrouck’s information share and Gonzalo and Granger’s common factor component to quantify the contribution of each market to the price discovery process. Both measures coincide in suggesting that the Bitcoin futures market dominates the price discovery process. We also find that both prices are driven by a common factor that is given by a weighted combination of the futures and spot market. Finally, we observe that deviations from the equilibrium condition equating the futures and spot log-price have predictive ability for the return on the Bitcoin spot price but not on the futures price.

Keywords: Bitcoin; Information share; Price discovery; Cointegration; Permanent–transitory decomposition (search for similar items in EconPapers)
JEL-codes: C1 C13 C5 G1 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:174:y:2019:i:c:p:62-64

DOI: 10.1016/j.econlet.2018.10.031

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