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Cryptocurrency Response to COVID-19: A Test of Efficient Market Hypothesis

In: Future of Work and Business in Covid-19 Era

Author

Listed:
  • Brajaballav Kar

    (School of Management, KIIT University)

  • Chandrabhanu Das

    (School of Management, KIIT University)

Abstract

Cryptocurrencies are a newer form of investment avenues without any geographical boundary. The asset gives confidence to its investors because of blockchain technology. However, a higher level of volatility is observed in such currencies. Partly because of the lack of an underlying asset base and thus, making it highly speculative. The efficient market hypothesis (EMH) indicates the value of an asset to be consistent with available information. The volatility observed raises a concern about the information efficiency of cryptocurrencies. The COVID-19 pandemic provided a context with dynamic information flows and uncertainty to test the weak form of EMH. In the weak form, past returns influence future prices. This study tested if returns from different cryptocurrencies are consistent with the weak form of EMH for the period 01.01.2020 to 31.12.2020 marked by the pandemic. The study finds that returns from cryptocurrencies did not consistently conform to the weak form of EMH. Thus, the market has irrationality and inefficiency related to the dynamic information flow during the pandemic. The findings are significant for policymakers, economists and investors.

Suggested Citation

  • Brajaballav Kar & Chandrabhanu Das, 2022. "Cryptocurrency Response to COVID-19: A Test of Efficient Market Hypothesis," Springer Proceedings in Business and Economics, in: Rabi Narayan Subudhi & Sumita Mishra & Abu Saleh & Dariush Khezrimotlagh (ed.), Future of Work and Business in Covid-19 Era, pages 9-18, Springer.
    • Handle: RePEc:spr:prbchp:978-981-19-0357-1_2
    DOI: 10.1007/978-981-19-0357-1_2
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    References listed on IDEAS

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