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What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying perspective?

Yang Hu, Yang Greg Hou and Les Oxley ()

International Review of Financial Analysis, 2020, vol. 72, issue C

Abstract: Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi, Phillips, and Hurn [2018]; time-varying cointegration tests of Park and Hahn [1999], and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process.

Keywords: Bitcoin; Futures; Time-varying; Granger causality; Cointegration; Price discovery (search for similar items in EconPapers)
JEL-codes: C5 G12 G13 G14 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302131

DOI: 10.1016/j.irfa.2020.101569

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