Fractional cointegration in bitcoin spot and futures markets

Wu, Jinghong; Xu, Ke; Zheng, Xinwei; Chen, Jian

doi:10.1002/fut.22216

Cited by 23 publications

(12 citation statements)

References 48 publications

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“…This means that on average, the bitcoin spot index price (i.e., BRR) is lower than the bitcoin futures price. It suggests that the bitcoin futures market is normally in contango where net‐long hedgers set the futures prices at a premium to attract net‐short speculators, which is in line with the finding of Wu et al (2021).…”

Section: Data and Empirical Methodssupporting

confidence: 85%

“…Huang et al (2021) find that trading activity of hedgers, speculators, and retailers influence price discovery process of the bitcoin futures market. According to Wu et al (2021), the bitcoin futures market presents a contango structure during the low demand periods but tends to convert to a backwardation structure during the high demand periods. In addition, the notion of convenience yield may be relevant to the bitcoin futures contracts that accept physical settlement, for example, the contracts offered by Bakkt 4 .…”

Section: Shimentioning

confidence: 99%

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Bitcoin futures risk premia

Shi

2022

Journal of Futures Markets

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This paper presents an empirical analysis of bitcoin futures risk premia. Based on the relevant theories and empirical findings of commodity futures risk premia, we study a battery of predictors, including position-based measures, market microstructure factors, and macroeconomic variables. We find that trading activity and extreme sentiment of speculators and retailers present significant predicting power on the subsequent bitcoin futures price changes over different time horizons. We also find evidence that the lower transaction cost, the higher bitcoin futures risk premiums. Regarding macroeconomic variables, financial conditions index, TED spread, US M2 money stock, and funding cost of financial institutions could predict bitcoin futures returns. The return impact of net position changes of hedgers is likely to be affected by extremes in macroeconomic variables. Speculators behave like negative feedback traders, while retailers are positive feedback traders. This detailed analysis of the risk premia of this emerging derivatives market provides critical implications.

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Section: Data and Empirical Methodssupporting

confidence: 85%

Section: Shimentioning

confidence: 99%

Bitcoin futures risk premia

Shi

2022

Journal of Futures Markets

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“…It is worth noting that many methods have been put forward and used in the academic research on price discovery. Wu et al (2021) adopted the fractionally cointegrated vector autoregressive model to explore high‐frequency price discovery in the Bitcoin market. Z. Chen et al (2021) used a VECM to study the price discovery of the Chinese agricultural futures market.…”

Section: Literature Reviewmentioning

confidence: 99%

Option features and price discovery in convertible bonds

Jin

Yuan

et al. 2022

Journal of Futures Markets

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In this paper, we investigate whether the option features in convertible bonds lead to price discovery. On the basis of minute-level data from January 2019 to December 2021, we find that the convertible bond market contributes to the price discovery of the stock market by using the thermal optimal path method, and that the option features in convertible bonds are an important factor affecting the price discovery ability. Regression analysis shows that the effect of option features remains significant after controlling for a range of variables, such as the size of the convertible bond, the premium rate, information shock, and volatility. In addition, we further explore the impact of the difference in trading regimes between the convertible bond market and the equity market on price discovery.

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“…The empirical research also provides evidence of strong bidirectional dependence in the intraday volatility of the spot and futures markets. Wu et al (2021) use the fractional cointegrating vector autoregressive (FCVAR) model to examine high-frequency price discovery of bitcoin spot and futures prices from 18 December 2017 to 31 July 2020. The results show that the bitcoin futures market dominates the price discovery process.…”

Section: Literature Reviewmentioning

confidence: 99%

Causality Relationship between Spot and Futures Bitcoin Prices in CME

Özdemir

2021

J. corp. gov. insur. risk manag.

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To protect against risks arising from fluctuations in spot prices and better manage risk, investors might evaluate futures markets. The role of price discovery in the futures markets and the possibility of reducing certain risks increase the importance of researching the relationship between spot and futures prices. This study aims to determine whether there is a relationship between the Bitcoin spot prices and the Bitcoin futures prices. To this end, the relationship between the two markets is analyzed using Johansen Cointegration analysis and Vector Error Correction Model (VECM) using the daily data of the period 02.23.2017 – 08.31.2021. Unit root tests show that each series are not stationary at the level values and that the first differences of the series are stationary. The results of the cointegration analysis show that there is a long-term equilibrium relationship between the bitcoin spot market and the bitcoin futures market, and it is a single cointegration vector. The Granger causality test based on the vector error correction model was used to determine the causality relationship between the series. It has been determined that there is a unidirectional causality relationship from the Bitcoin spot market to the Bitcoin futures market. Bitcoin is a new financial tool that attracts the attention of investors. Investors make transactions on Bitcoin for speculative purposes. Therefore, unlike other investment instruments, spot prices in the bitcoin market affect futures prices.

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Fractional cointegration in bitcoin spot and futures markets

Cited by 23 publications

References 48 publications

Bitcoin futures risk premia

Bitcoin futures risk premia

Option features and price discovery in convertible bonds

Causality Relationship between Spot and Futures Bitcoin Prices in CME

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