Browsing by Author "Kehne, Constance"
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- Efficiency of cryptocurrencies : will arbitrage opportunities continue?Publication . Kehne, Constance; Schliephake, EvaCryptocurrencies are increasingly popular among investors and consequently receive rising attention, not only from the public but also from researchers. However, there remain many unsettled questions like whether cryptocurrencies are weak-form efficient. If they were, this would mean that technical trading, the most widely used trading strategy by retail traders, does no longer yield abnormal returns. This paper adds to the current literature by analysing the development of efficiency in Bitcoin and Ether over a time horizon from 2010 to 2022. I take these two cryptocurrencies as representatives of the overall cryptocurrency market since together they have a market share of over 60%. Using multiple efficiency tests, I build an efficiency index to track the development of efficiency of the analysed cryptocurrencies. Through a dynamic rolling window analysis and the split among several representative subsamples, I conclude that Bitcoin and Ether become more efficient over time. For both cryptocurrencies, this increase in efficiency is positively correlated with an increase in liquidity. Comparing these results to the exchange rate of the Euro to the US-Dollar, the cryptocurrencies show a higher level of efficiency. This is not surprising considering that there is no central authority intervening to regulate the market.