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

See all articles by Yang Hu

Yang Hu

School of Accounting, Finance and Economics, University of Waikato

Yang Hou

School of Accounting, Finance and Economics,, Waikato Management School, University of Waikato

Les Oxley

University of Waikato - Department of Economics and Finance; Motu Economic and Public Policy Research Trust; Curtin University - Department of Economics

Date Written: August 26, 2019

Abstract

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

Hu, Yang and Hou, Yang and Oxley, Les, What Role Do Futures Markets Play in Bitcoin Pricing? Causality, Cointegration and Price Discovery From a Time-Varying Perspective (August 26, 2019). Available at SSRN: https://ssrn.com/abstract=3442706 or http://dx.doi.org/10.2139/ssrn.3442706

Yang Hu

School of Accounting, Finance and Economics, University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Yang Hou

School of Accounting, Finance and Economics,, Waikato Management School, University of Waikato ( email )

Private Bag 3105
Hamilton, 3240
New Zealand

Les Oxley (Contact Author)

University of Waikato - Department of Economics and Finance ( email )

Private Bag 3105
Hamilton, 3105
New Zealand

Motu Economic and Public Policy Research Trust ( email )

Level 1 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Curtin University - Department of Economics ( email )

Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
82
Abstract Views
814
rank
333,275
PlumX Metrics