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Spot and Futures Prices of Bitcoin: Causality, Cointegration and Price Discovery from a Time-Varying Perspective

Author

Listed:
  • Yang Hu

    (University of Waikato)

  • Yang (Greg) Hou

    (University of Waikato)

  • Les Oxley

    (University of Waikato)

Abstract
This paper investigates the causal relationships, cointegration and price discovery between spot and futures markets of Bitcoin using the daily data from a time-varying perspective for the first time in the literature. We apply the time-varying Granger causality test of Shi et al. (2018) to explore the causal relationship between spot and futures markets and find that futures prices Granger cause spot prices. We identify the existence of a cointegration relationship under the consideration of a time-varying cointegrating coefficient between spot and futures prices based on the Park and Hahn (1999) test. We also explore the time-varying price discovery process and find that futures prices dominate in the process, implying a leading informational role.

Suggested Citation

  • Yang Hu & Yang (Greg) Hou & Les Oxley, 2019. "Spot and Futures Prices of Bitcoin: Causality, Cointegration and Price Discovery from a Time-Varying Perspective," Working Papers in Economics 19/13, University of Waikato.
    • Handle: RePEc:wai:econwp:19/13
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    File URL: https://repec.its.waikato.ac.nz/wai/econwp/1913.pdf
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    References listed on IDEAS

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    Cited by:

    1. Saketh Aleti & Bruce Mizrach, 2021. "Bitcoin spot and futures market microstructure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 194-225, February.

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    More about this item

    Keywords

    Bitcoin; futures; time-varying; causality; cointegration; price discovery;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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