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Analyzing the efficient market hypothesis with asymmetric persistence in cryptocurrencies: Insights from the Fourier non-linear quantile unit root approach

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  • Kilic, Emre
  • Yavuz, Ersin
  • Pazarci, Sevket
  • Kar, Asim

Abstract

We test the efficient market hypothesis (EMH) in Bitcoin (BTC) and Ethereum (ETH) using the further Fourier nonlinear quantile (FNQKS) unit root test by Bahmani-Oskooee et al. (2020). While conventional tests support EMH in the cryptocurrency market, the FNQKS unit root test does not support EMH. Considering non-linearity, Fourier breaks, and non-normal distribution in BTC and ETH exhibit asymmetric persistence. This allows investors to make adjustments to their portfolios in response to both negative and positive shocks.

Suggested Citation

  • Kilic, Emre & Yavuz, Ersin & Pazarci, Sevket & Kar, Asim, 2023. "Analyzing the efficient market hypothesis with asymmetric persistence in cryptocurrencies: Insights from the Fourier non-linear quantile unit root approach," Finance Research Letters, Elsevier, vol. 58(PC).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323009005
    DOI: 10.1016/j.frl.2023.104528
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    More about this item

    Keywords

    Cryptocurrency; EMH; Smooth breaks; Non-linearity; Quantile unit root;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F3 - International Economics - - International Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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