Price Overreactions in the Cryptocurrency Market

Guglielmo Maria Caporale and Alex Plastun

No 6861, CESifo Working Paper Series from CESifo

Abstract: This paper examines price overreactions in the case of the following cryptocurrencies: BitCoin, LiteCoin, Ripple and Dash. A number of parametric (t-test, ANOVA, regression analysis with dummy variables) and non-parametric (Mann–Whitney U test) tests confirm the presence of price patterns after overreactions: the next-day price changes in both directions are bigger than after “normal” days. A trading robot approach is then used to establish whether these statistical anomalies can be exploited to generate profits. The results suggest that a strategy based on counter-movements after overreactions is not profitable, whilst one based on inertia appears to be profitable but produces outcomes not statistically different from the random ones. Therefore the overreactions detected in the cryptocurrency market do not give rise to exploitable profit opportunities (possibly because of transaction costs) and cannot be seen as evidence against the Efficient Market Hypothesis (EMH).

Keywords: cryptocurrency market; Bitcoin; overreaction; momentum; abnormal returns; contrarian strategy; trading strategy; trading robot (search for similar items in EconPapers)
JEL-codes: C63 G12 G17 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-com and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6861.pdf (application/pdf)

Related works:
Journal Article: Price overreactions in the cryptocurrency market (2019)
Working Paper: Price Overreactions in the Cryptocurrency Market (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6861

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().