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Pricing efficiency and market efficiency of two bitcoin funds

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  • Andrei Shynkevich

Abstract

This study explores whether pricing inefficiency, or imperfect tracking in the market value of shares of a bitcoin fund of the fund’s net asset value (NAV), makes a significant impact on the fund’s market efficiency relative to the retail bitcoin market. Two bitcoin funds whose shares are traded at the exchanges which impose more stringent criteria for transparency compared to cryptocurrency exchanges are considered. The fund whose shares have been trading without significant premium or a discount relative to its NAV is found as weak-form efficient. The fund, whose shares have been trading at a significant premium over its NAV is found inefficient due to the presence of persistent and strong positive autocorrelation in its returns. Trading of shares in the inefficiently priced fund appears to be even more emotion-driven than the already volatile and emotional trading of bitcoin and exhibits a strong herding behaviour.

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  • Andrei Shynkevich, 2020. "Pricing efficiency and market efficiency of two bitcoin funds," Applied Economics Letters, Taylor & Francis Journals, vol. 27(20), pages 1623-1628, November.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:20:p:1623-1628
    DOI: 10.1080/13504851.2019.1707760
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    Cited by:

    1. Ahmed, Walid M.A., 2021. "Stock market reactions to upside and downside volatility of Bitcoin: A quantile analysis," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).

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