A seesaw effect in the cryptocurrency market: Understanding the return cross predictability of cryptocurrencies

Yuecheng Jia, Yangru Wu, Shu Yan and Yuzheng Liu

Journal of Empirical Finance, 2023, vol. 74, issue C

Abstract: This paper investigates the intraday return cross-predictability of cryptocurrencies. In contrast to the positive lead–lag effect for stocks, we document a negative lead–lag effect in the cryptocurrency market. Specifically, the large coins negatively predict the other coins but the small coins rarely predict the large coins. A trading strategy that exploits the cross-predictability via the Least Absolute Shrinkage and Selection Operator (LASSO) yields highly significant profits across major cryptocurrency exchanges even in the presence of realistic transaction costs.

Keywords: Cryptocurrency; Cross predictability; Information spillover; Money flow (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:74:y:2023:i:c:s0927539823000956

DOI: 10.1016/j.jempfin.2023.101428

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