Price discovery in bitcoin spot or futures?. Issue 7 (18th February 2019)

• Record Type: Journal Article
• Authors: Baur, Dirk G.; Dimpfl, Thomas
• Is Part Of: Journal of futures markets. Volume 39:Issue 7(2019)
• Page Start: 803
• Page End: 817
• Publication Date: 2019-02-18
• Subjects: bitcoin -- cointegration -- futures -- information shares -- price discovery; Commodity exchanges -- Periodicals; Foreign exchange futures -- Periodicals; 332.632
• DOI: 10.1002/fut.22004
• Languages: English
• ISSNs: 0270-7314

Abstract

Abstract: In December 2017, both the Chicago Board Options Exchange and the Chicago Mercantile Exchange introduced futures contracts on bitcoin. We investigate to what extent they provide useful information for the price discovery of bitcoin. We rely on the information share methodology of Hasbrouck (1995, J Finance, 50, pp. 1175–1199) and Gonzalo and Granger (1995, J Bus Econ Stat, 13, pp. 27–35) and find that the spot price leads the futures price. We attribute this result to the higher trading volume and the longer trading hours of the globally distributed bitcoin spot market, compared to the relatively restricted access to the US‐based futures markets.