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Announcement effects in the cryptocurrency market

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  • Mohammad Hashemi Joo
  • Yuka Nishikawa
  • Krishnan Dandapani

Abstract

Cryptocurrencies have gained popularity as new economic investment assets globally in recent years. This study examines market reactions to major news events associated with cryptocurrencies. Abnormal returns as well as cumulative abnormal returns (CARs) around major news announcements, both positive and negative, are investigated for three primary cryptocurrencies: Bitcoin, Ethereum, and Ripple. High abnormal returns are observed on the event day (Day 0), and CARs typically diverge during event windows of (−3, 6) and (0, 6), indicating that the information is not fully reflected in prices immediately after the news events. The CARs that linger for six days after an event suggest that the information flow in the cryptocurrency market is visibly slow. The magnitudes of CARs are larger for negative events than for positive events, implying that the market reaction to negative events is stronger than to positive announcements. The findings of this study may have crucial implications for investors, arbitragers and practitioners as we document evidence of potential trading opportunities for investors who initiate a trading position even after announcements.

Suggested Citation

  • Mohammad Hashemi Joo & Yuka Nishikawa & Krishnan Dandapani, 2020. "Announcement effects in the cryptocurrency market," Applied Economics, Taylor & Francis Journals, vol. 52(44), pages 4794-4808, September.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:44:p:4794-4808
    DOI: 10.1080/00036846.2020.1745747
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    Citations

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    Cited by:

    1. Ante, Lennart, 2023. "How Elon Musk's Twitter activity moves cryptocurrency markets," Technological Forecasting and Social Change, Elsevier, vol. 186(PA).
    2. Naseem Al Rahahleh & Ahmed Al Qurashi, 2024. "The impact of COVID-19 on Ethereum returns and Ethereum market efficiency," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(3), pages 729-755, September.
    3. Mohamed Arouri & Sabrine Ayed & Mathieu Gomes & Adel Barguellil, 2023. "War and cryptocurrency markets: An empirical investigation," Economics Bulletin, AccessEcon, vol. 43(4), pages 1614-1625.
    4. de l’Etang, Filezac, 2024. "Dollar’s role in institutional and media impact on stablecoins," Finance Research Letters, Elsevier, vol. 61(C).
    5. Martins, António Miguel, 2024. "Short-term market impact of crypto firms’ bankruptcies on cryptocurrency markets," Research in International Business and Finance, Elsevier, vol. 70(PB).
    6. Emrah Öget, 2022. "The Effect of Positive and Negative Events on Cryptocurrency Prices," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 7(1), pages 16-31.
    7. Thomas Bourveau & Janja Brendel & Jordan Schoenfeld, 2024. "Decentralized Finance (DeFi) assurance: early evidence," Review of Accounting Studies, Springer, vol. 29(3), pages 2209-2253, September.
    8. Nidhal Mgadmi & Azza Béjaoui & Wajdi Moussa, 2023. "Disentangling the Nonlinearity Effect in Cryptocurrency Markets During the Covid-19 Pandemic: Evidence from a Regime-Switching Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(3), pages 457-473, September.
    9. Davide Debortoli & Mario Forni & Luca Gambetti & Luca Sala, 2020. "Asymmetric monetary policy tradeoffs," Economics Working Papers 1742, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2023.
    10. Scharnowski, Stefan, 2022. "Central bank speeches and digital currency competition," Finance Research Letters, Elsevier, vol. 49(C).
    11. Demir, Ender & Ersan, Oguz & Popesko, Boris, 2022. "Are Fan Tokens Fan Tokens?," Finance Research Letters, Elsevier, vol. 47(PB).

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