IDEAS home Printed from https://ideas.repec.org/a/oup/rasset/v12y2022i3p667-705..html
   My bibliography  Save this article

The Cross-Section of Cryptocurrency Returns
[A simple estimation of bid-ask spreads from daily close, high, and low prices]

Author

Listed:
  • Nicola Borri
  • Kirill Shakhnov

Abstract

At a given point in time, bitcoin prices are different on exchanges located in different countries, or against different currencies. While existing literature attributes the largest price differences to frictions, like market segmentation, trading platforms advertize how to execute trades based on this information. We provide a novel risk-based explanation of these price differences for a sample containing the most reputable exchanges and after accounting for all transaction costs and limitations to trade. Bitcoin prices for more expensive pairs are riskier because they depreciate more in bad times for cryptocurrency investors, when aggregate liquidity and investor sentiment are lower. (JEL G12, G14, G15, F31).

Suggested Citation

  • Nicola Borri & Kirill Shakhnov, 2022. "The Cross-Section of Cryptocurrency Returns [A simple estimation of bid-ask spreads from daily close, high, and low prices]," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 12(3), pages 667-705.
    • Handle: RePEc:oup:rasset:v:12:y:2022:i:3:p:667-705.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rapstu/raac007
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cakici, Nusret & Shahzad, Syed Jawad Hussain & Będowska-Sójka, Barbara & Zaremba, Adam, 2024. "Machine learning and the cross-section of cryptocurrency returns," International Review of Financial Analysis, Elsevier, vol. 94(C).
    2. Emanuele Citera & Francesco De Pretis, 2023. "An Information Theory Approach to the Stock and Cryptocurrency Market: A Statistical Equilibrium Perspective," Papers 2310.04907, arXiv.org.
    3. Wang, Yifu & Lu, Wanbo & Lin, Min-Bin & Ren, Rui & Härdle, Wolfgang Karl, 2024. "Cross-exchange crypto risk: A high-frequency dynamic network perspective," International Review of Financial Analysis, Elsevier, vol. 94(C).
    4. Borri, Nicola & Shakhnov, Kirill, 2023. "Cryptomarket discounts," Journal of International Money and Finance, Elsevier, vol. 139(C).
    5. Dobrynskaya, Victoria, 2024. "Is downside risk priced in cryptocurrency market?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    6. Nikolaus Hautsch & Christoph Scheu & Stefan Voigt, 2024. "Building trust takes time: limits to arbitrage for blockchain-based assets," Review of Finance, European Finance Association, vol. 28(4), pages 1345-1381.
    7. Cynthia Weiyi Cai & Rui Xue & Bi Zhou, 2023. "Cryptocurrency puzzles: a comprehensive review and re-introduction," Journal of Accounting Literature, Emerald Group Publishing Limited, vol. 46(1), pages 26-50, June.
    8. Jia, Yuecheng & Wu, Yangru & Yan, Shu & Liu, Yuzheng, 2023. "A seesaw effect in the cryptocurrency market: Understanding the return cross predictability of cryptocurrencies," Journal of Empirical Finance, Elsevier, vol. 74(C).
    9. Graf von Luckner, Clemens & Reinhart, Carmen M. & Rogoff, Kenneth, 2023. "Decrypting new age international capital flows," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 104-122.
    10. Aysan, Ahmet Faruk & Caporin, Massimiliano & Cepni, Oguzhan, 2024. "Not all words are equal: Sentiment and jumps in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    11. Saggese, Pietro & Belmonte, Alessandro & Dimitri, Nicola & Facchini, Angelo & Böhme, Rainer, 2023. "Arbitrageurs in the Bitcoin ecosystem: Evidence from user-level trading patterns in the Mt. Gox exchange platform," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 251-270.
    12. Crépellière, Tommy & Pelster, Matthias & Zeisberger, Stefan, 2023. "Arbitrage in the market for cryptocurrencies," Journal of Financial Markets, Elsevier, vol. 64(C).
    13. Zhang, Zehua & Zhao, Ran, 2023. "Good volatility, bad volatility, and the cross section of cryptocurrency returns," International Review of Financial Analysis, Elsevier, vol. 89(C).

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rasset:v:12:y:2022:i:3:p:667-705.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/raps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.