What Role Do Futures Markets Play in Bitcoin Pricing? Causality, Cointegration and Price Discovery From a Time-Varying Perspective
36 Pages Posted: 29 Aug 2019 Last revised: 22 Oct 2019
Date Written: August 26, 2019
Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi et al. (2018); time-varying cointegration tests of Park & Hahn (1999), and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process.
Keywords: Bitcoin, Futures, Time-varying, Causality, Cointegration, Price Discovery
JEL Classification: C5, G12, G13, G14
Suggested Citation: Suggested Citation