Determinants of Price Discovery on Bitcoin: Evidence from Spot and Futures Markets

Since the wide price fluctuation happened in the spot market of Bitcoin, Bitcoin futures has been issued. The rapid development of blockchain brings Cryptocurrencies launched one after the other, and its high return-on-investment rate attracts investors all around the world. This situation shows the...

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Published inInternational research journal of applied finance Vol. 9; no. 8; pp. 394 - 403
Main Authors Lian, Yu-Min, Cheng, Chi-Hung, Jhong, Yu-Jhih, Lin, Shih-Hsun, Yang, Jian-Chi, Lin, Fang-Yu, Chiang, Yi-Wei
Format Journal Article
LanguageEnglish
Published Hyderabad International Research Journal of Applied Finance 01.08.2018
Subjects
Blockchain
Capital assets
CAPM
Digital currencies
Futures market
Futures trading
Hedging
Interest rates
Rates of return
Securities markets
Stock exchanges
Studies
Taiwan
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Summary:Since the wide price fluctuation happened in the spot market of Bitcoin, Bitcoin futures has been issued. The rapid development of blockchain brings Cryptocurrencies launched one after the other, and its high return-on-investment rate attracts investors all around the world. This situation shows the importance of risk management. This study discusses the determinants of undiversified risk in the spot market of Bitcoin and Bitcoin futures based on capital asset pricing model. In order to measure the information asymmetry, we especially use dummy variables to integrate information factors. This method lead us to analyze the transmission effect of market information to expected rate of returns on Bitcoin spot and futures. Empirical results show that our model is able to measure systematic risks of Bitcoin spot and futures markets. We also discover expected rate of returns on these two targets are highly affected by market information in both markets.
ISSN:2229-6891