Overreaction, Underreaction, and Short-Term Efficient Reaction Evidence for Cryptocurrencies

Dias, Rui Teixeira; Chambino, Mariana; Palma, Cristina; Almeida, Liliana; Alexandre, Paulo

doi:10.4018/978-1-6684-9039-6.ch014

Cited by 4 publications

References 48 publications

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Extreme Events Cause Market Efficiency or Inefficiency? Evidence from Precious Metals and Green Stock Indices

Oliveira,

Dias,

Galvão

et al. 2024

RGSA

Self Cite

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Background: Green investments offer a promising market-based approach to tackling global climate change but are susceptible to risk transmission from multiple assets. Purpose: To examine the multifractality between precious metals (Gold, Silver, Platinum) and green stock indices, such as Clean Energy Fuels, Nasdaq Clean Edge Green Energy, S&P Global Clean Energy and WilderHill Clean Energy, over the period from 1 January 2018 to 23 November 2023. The study aims to answer the following question: Did the events of 2020 and 2022 cause efficiency or inefficiency in the markets analysed? Methods: The Detrended Fluctuation Analysis (DFA) econophysics model will be used to answer the research question. Results: During the period of stability, there was a clear division between the markets, with Gold and green energy indices demonstrating market efficiency, while Platinum, Silver and some green indices exhibited price persistence, suggesting opportunities for above-average gains. However, the 2020 global pandemic led to widespread inefficiencies in all the markets analysed, with precious metals and green energy indices showing price persistence, indicating patterns that could lead to arbitrage opportunities. The persistence in returns suggested a tendency for asset prices to continue in the same direction for an extended period, offering opportunities to identify ongoing market trends for investment. In the pre-conflict period, the random walk hypothesis was rejected in all markets, with precious metals exhibiting anti-persistence in returns, while green energy indices showed significant persistence. During the conflict period, precious metals and green energy indices converged towards persistence in returns, except Platinum, which showed anti-persistence. Conclusion: This study provides valuable insights for investors and financial market professionals, highlighting the importance of understanding asset price behaviour patterns in different economic contexts.

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Extreme Events Cause Market Efficiency or Inefficiency? Evidence from Precious Metals and Green Stock Indices

Oliveira,

Dias,

Galvão

et al. 2024

RGSA

Self Cite

View full text Add to dashboard Cite

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Understanding the Efficiency Levels among Cryptocurrencies: Islamic, Green and Traditional

Dias,

Galvão,

Iran

et al. 2024

RGSA

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Background: Islamic cryptocurrencies are different from conventional ones in that they are backed by physical assets and are based on religious principles. After the COVID-19 pandemic, cryptocurrencies showed different behavior. However, there are not many studies on the efficiency, in its weak form, of these three typical families of cryptocurrencies (Islamic, green, and traditional). Purpose: This study compares the efficiency levels of Islamic cryptocurrencies (HelloGold), green cryptocurrencies (Cardano, NANO, Stellar, IOTA), and traditional cryptocurrencies (BTC and ETH) in the preceding period and during the geopolitical conflict between Russia and Ukraine in 2022. Methods: This research will use Lo and Mackinlay's (1988) variance ratio methodology, and the Detrended Fluctuation Analysis (DFA) model will be used. Results: The results indicate that the Islamic currency HGT and the green currency XNO display significant information asymmetries, rejecting the random walk hypothesis for various time intervals. Similarly, other green currencies such as XLM, ADA, and MIOTA, as well as ETH and BTC, reject the hypothesis to varying degrees and time intervals. Furthermore, the Islamic cryptocurrency (HelloGold) was anti-persistent before and during the conflict. The digital currencies ADA and BTC are persistent in both periods. ETH is in equilibrium in the pre-conflict period and becomes persistent during the conflict (0.50 - 0.56), while MIOTA and XLM are persistent during the pre-conflict period and shift to equilibrium during the Russian invasion of Ukraine in 2022. Finally, the XNO eco-currency shows the same anti-persistence characteristics during the two sub-periods. Conclusion: These results highlight the complexity and dynamics of cryptocurrency markets, indicating that different digital currencies can exhibit different temporal behaviors regarding information efficiency and persistence or anti-persistence patterns.

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Analyzing Persistence in Sustainable Indices and Global Stock Indices

Dias,

Irfan,

Galvão

et al. 2024

Issues of Sustainability in AI and New-Age Thematic Investing

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This study aims to examine multifractality and test whether green markets and traditional capital markets react similarly to the phenomenon of persistence during extreme events in international financial markets. The green indices analyzed are from the USA, namely S&P Green Bond, Wilderhill Clean Energy, and the capital markets of the United Kingdom (FTSE 100), Europe (EURO STOXX 50), the USA (DOW JONES), Japan (NIKKEI 225), China (SHANGHAI SE A), India (NIFTY 500), Israel (TA 125), and Russia (MOEX) from January 1, 2018 to November 23, 2023. The results show no significant differences between green markets and traditional capital markets in terms of persistence, either in periods of stress or tranquility in the international financial markets; therefore, the research question is rejected because there are no distinct behavior patterns. The findings provide crucial insights for investors, policymakers, and other participants in the green and traditional financial markets.

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Overreaction, Underreaction, and Short-Term Efficient Reaction Evidence for Cryptocurrencies

Cited by 4 publications

References 48 publications

Extreme Events Cause Market Efficiency or Inefficiency? Evidence from Precious Metals and Green Stock Indices

Extreme Events Cause Market Efficiency or Inefficiency? Evidence from Precious Metals and Green Stock Indices

Understanding the Efficiency Levels among Cryptocurrencies: Islamic, Green and Traditional

Analyzing Persistence in Sustainable Indices and Global Stock Indices

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