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Full-Text Articles in Business
A Reexamination Of The Illiquidity Premium In Cryptocurrencies, Wyatt Fitz
A Reexamination Of The Illiquidity Premium In Cryptocurrencies, Wyatt Fitz
All Graduate Plan B and other Reports, Spring 1920 to Spring 2023
In this study, I examine the illiquidity premium amongst the 372 most actively traded cryptocurrencies from September 2014 to May 2021. I find that the average returns on the most illiquid cryptocurrencies are larger than those on the most liquid cryptocurrencies. My results are robust to different weighting mechanisms for the market index and to various asset pricing model specifications. These results suggest that an investor might be able to go long a portfolio of illiquid cryptocurrencies while simultaneously shorting a portfolio of liquid cryptocurrencies to effectively generate a positive risk-adjusted return.
The Introduction Of Bitcoin Futures: An Examination Of Volatility And Potential Spillover Effects, Benjamin M. Blau, Ryan J. Whitby
The Introduction Of Bitcoin Futures: An Examination Of Volatility And Potential Spillover Effects, Benjamin M. Blau, Ryan J. Whitby
Economics and Finance Faculty Publications
Theory in Stein (1987) suggests that introducing derivative contracts, such as futures, can destabilize underlying asset prices if the contracts attract enough speculative traders. This paper examines how the introduction of Bitcoin futures influences the underlying Bitcoin market. Consistent with Stein (1987), we find that that Bitcoin's volatility increases significantly during the post-introduction period. Perhaps more importantly, however, we observe significant spillover effects into related markets. For instance, in other cryptocurrencies, the increase in volatility in these markets is greater than the post-introduction increase in Bitcoin.