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Price discovery in cryptocurrency markets

Makarov, Igor and Schoar, Antoinette (2019) Price discovery in cryptocurrency markets. AEA Papers and Proceedings, 109. pp. 97-99. ISSN 2574-0768

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Identification Number: 10.1257/pandp.20191020

Abstract

We ask which markets drive bitcoin prices and how price discovery happens across different exchanges. Does the greater exuberance for cryptocurrencies outside the United States affect prices only on local markets or does it impact price formation on global cryptocurrency markets? We document significant heterogeneity in which price formation happens across exchanges and time. When markets are more integrated, shocks to prices on all exchanges contribute to price discovery. However, when markets become segmented, those exchanges that have large arbitrage spreads relative to the US price, i.e. where investors are more exuberant become much less important for price discovery.

Item Type: Article
Additional Information: © 2019 American Economic Association
Divisions: Finance
Subjects: H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
Date Deposited: 03 Apr 2019 08:48
Last Modified: 27 Jul 2020 00:07
URI: http://eprints.lse.ac.uk/id/eprint/100410

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