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Pricing Efficiency and Arbitrage in the Bitcoin Spot and Futures Markets

Seungho Lee, Nabil El Meslmani and Lorne N. Switzer

Research in International Business and Finance, 2020, vol. 53, issue C

Abstract: This study examines the pricing efficiency for the leading cryptocurrency, Bitcoin using spot prices and all CBOE and CME futures contracts traded from January 2018 to March 2019. We find that the futures basis provide some predictive power for future changes in the spot price and in the risk premium. However, the basis of Bitcoin is a biased predictor of the future spot price changes. Cointegration tests also demonstrate that futures prices are biased predictors of spot prices. Deviations from no-arbitrage between spot and futures markets are persistent and widen significantly with Bitcoin thefts (hacks, frauds) as well as alternative cryptocurrency issuances.

Keywords: Bitcoin; cryptocurrency; speculation; efficient markets; futures arbitrage (search for similar items in EconPapers)
JEL-codes: E31 E42 G11 G12 G14 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919309808

DOI: 10.1016/j.ribaf.2020.101200

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