Cryptocurrency Market Efficiency: Evidence from Wavelet Analysis

Jarko Fidrmuc, Svatopluk Kapounek and Frederik Junge ()
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Frederik Junge: Zeppelin University Friedrichshafen, Friedrichshafen, Germany

Czech Journal of Economics and Finance (Finance a uver), 2020, vol. 70, issue 2, 121-144

Abstract: We examine daily USD returns for Bitcoin, Ethereum and Litecoin between October 2013 and September 2019 at six separate exchanges employing wavelet methodology. This approach, as compared to the standard time domain analysis, is superior because it tests the existence of cyclical persistencies at different investment horizons. We identify significant but temporal cyclical movements and coherence between the markets at high frequencies which is broadly consistent with market inefficiency given liquidity constraints of cryptocurrencies. Moreover, we identify temporal arbitrage opportunities between the selected exchanges.

Keywords: efficient market hypothesis; market arbitrage; wavelet analysis (search for similar items in EconPapers)
JEL-codes: C14 C58 G14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:70:y:2020:i:2:p:121-144

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