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Fractional cointegration in bitcoin spot and futures markets
Author(s) -
Wu Jinghong,
Xu Ke,
Zheng Xinwei,
Chen Jian
Publication year - 2021
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22216
Subject(s) - futures contract , price discovery , normal backwardation , cointegration , economics , spot contract , financial economics , autoregressive model , spot market , cryptocurrency , econometrics , futures market , computer science , engineering , electricity , computer security , electrical engineering
This paper adopts the fractional cointegrated vector autoregressive (FCVAR) model to examine high‐frequency price discovery of bitcoin spot and futures prices from December 18, 2017 to July 31, 2020. We find that bitcoin spot and futures prices exhibit long memory properties and they are fractionally cointegrated. The result shows that the bitcoin futures market dominates the price discovery process. Interestingly, during the Covid‐19 pandemic, the bitcoin price discovery leadership has switched to the spot market. Moreover, we find that the bitcoin futures market follows a long‐run contango. The nonfractional CVAR model overestimates the price discovery of the futures market.