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The adaptive market hypothesis in the high frequency cryptocurrency market

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  • Chu, Jeffrey
  • Zhang, Yuanyuan
  • Chan, Stephen

Abstract

This paper investigates the adaptive market hypothesis (AMH) with respect to the high frequency markets of the two largest cryptocurrencies — Bitcoin and Ethereum, versus the Euro and US Dollar. Our findings are consistent with the AMH and show that the efficiency of the markets varies over time. We also discuss possible news and events which coincide with significant changes in the market efficiency. Furthermore, we analyse the effect of the sentiment of these news and other factors (events) on the market efficiency in the high frequency setting, and provide a simple event analysis to investigate whether specific factors affect the market efficiency/inefficiency. The results show that the sentiment and types of news and events may not be significant factor in determining the efficiency of cryptocurrency markets.

Suggested Citation

  • Chu, Jeffrey & Zhang, Yuanyuan & Chan, Stephen, 2019. "The adaptive market hypothesis in the high frequency cryptocurrency market," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 221-231.
    • Handle: RePEc:eee:finana:v:64:y:2019:i:c:p:221-231
    DOI: 10.1016/j.irfa.2019.05.008
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    More about this item

    Keywords

    Bitcoin; Ethereum; Martingale difference hypothesis; Adaptive market hypothesis; Efficient market hypothesis;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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