Price discovery in bitcoin spot or futures during the Covid-19 pandemic? Evidence from the time-varying parameter vector autoregressive model with stochastic volatility

【Author】 Mohamad, Azhar; Inani, Sarveshwar Kumar

【Source】APPLIED ECONOMICS LETTERS

【影响因子】1.287

【Abstract】This paper examines price discovery between bitcoin spot and futures using static measures, namely information share (IS), component share (CS), modified information share (MIS), information leadership share (ILS), impulse response, and a time-varying parameter vector autoregressive (TVP-VAR) model with stochastic volatility and Markov Chain Monte Carlo (MCMC) sampling algorithm. Our one-minute and daily datasets cover 16 months before and 16 months during the Covid-19 pandemic (November 2018 to June 2021). Our IS, CS, MIS and impulse response results indicate a stronger bitcoin spot leadership, whereas our ILS results point to a weaker bitcoin futures dominance, during the Covid-19 pandemic. We construe this, as far as microstructure noise is concerned, as meaning that the bitcoin price is discovered in the spot market, and its dominance appears to have strengthened during the pandemic. However, as far as 'pure speed' is concerned, price discovery takes place in the bitcoin futures market, and its leadership seems to have weakened during the Covid-19 pandemic. The results of the time-varying measure (TVP-VAR) imply that, before the pandemic, price discovery took place within bitcoin futures but, during the pandemic, price discovery leadership has changed course, to occur within bitcoin spot.

【Keywords】Bitcoin; price discovery; TVP-VAR; Markov Chain Monte Carlo; futures; Covid-19

【发表时间】

【收录时间】2022-08-15

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-数字货币