A Seesaw Effect in the Cryptocurrency Market: Understanding the Lead–Lag Effect Among Cryptocurrencies

43 Pages Posted: 17 Oct 2019

See all articles by Yuecheng Jia

Yuecheng Jia

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics

Shu Yan

Oklahoma State University - Stillwater - Department of Finance

Chenxi YIN

affiliation not provided to SSRN

Date Written: October 8, 2019

Abstract

This paper investigates the cross predictability of intraday returns across 22 major cryptocurrencies. In contrast to the well-documented positive lead-lag effect in the equity market, we find a significantly negative lead-lag effect ("seesaw effect'') in the cryptocurrency market: The five largest cryptocurrencies (Bitcoin, Ripple, Ethereum, Litecoin, and EOScoin) negatively predict the returns of other coins but small coins do not predict the large coins. Trading strategies that exploit the cross predictability yield highly significant profits. Further analysis suggests that the "flight to hot (large) coins" and "flee from cold (large) coins" jointly drive the seesaw effect.

Keywords: Cryptocurrency, Cross Predictability, Lead–Lag, Seesaw Effect, LASSO, Money Flow

JEL Classification: G12, G14

Suggested Citation

Jia, Yuecheng and Wu, Yangru and Yan, Shu and YIN, Chenxi, A Seesaw Effect in the Cryptocurrency Market: Understanding the Lead–Lag Effect Among Cryptocurrencies (October 8, 2019). Available at SSRN: https://ssrn.com/abstract=3465924 or http://dx.doi.org/10.2139/ssrn.3465924

Yuecheng Jia (Contact Author)

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development ( email )

39 South College Road
Beijing
China

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-1146 (Phone)
973-353-1006 (Fax)

HOME PAGE: http://andromeda.rutgers.edu/~yangruwu

Shu Yan

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States

Chenxi YIN

affiliation not provided to SSRN

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