Murat Tiniç
Adverse selection in cryptocurrency markets
Tiniç, Murat; Sensoy, Ahmet; Akyildirim, Erdinc; Corbet, Shaen
Authors
Mr AHMET SENSOY Ahmet.Sensoy2@nottingham.ac.uk
Postgraduate Teaching Assistant (PGTA)
Dr ERDINC AKYILDIRIM Erdinc.Akyildirim@nottingham.ac.uk
ASSISTANT PROFESSOR
Shaen Corbet
Abstract
In this article we investigate the influence that information asymmetry may have on future volatility, liquidity, market toxicity, and returns within cryptocurrency markets. We use the adverse-selection component of the effective spread as a proxy for overall information asymmetry. Using order and trade data from the Bitfinex exchange, we first document statistically significant adverse-selection costs for major cryptocurrencies. Also, our results suggest that adverse-selection costs, on average, correspond to 10% of the estimated effective spread, indicating an economically significant impact of adverse-selection risk on transaction costs in cryptocurrency markets. Finally, we document that adverse-selection costs are important predictors of intraday volatility, liquidity, market toxicity, and returns.
Citation
Tiniç, M., Sensoy, A., Akyildirim, E., & Corbet, S. (2023). Adverse selection in cryptocurrency markets. Journal of Financial Research, 46(2), 497-546. https://doi.org/10.1111/jfir.12317
Journal Article Type | Article |
---|---|
Acceptance Date | Aug 23, 2022 |
Online Publication Date | Jan 30, 2023 |
Publication Date | Jun 5, 2023 |
Deposit Date | Oct 24, 2024 |
Publicly Available Date | Jan 31, 2025 |
Print ISSN | 0270-2592 |
Electronic ISSN | 1475-6803 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 46 |
Issue | 2 |
Pages | 497-546 |
DOI | https://doi.org/10.1111/jfir.12317 |
Keywords | Cryptocurrencies; Market Microstructure; Adverse Selection; Informed Trading JEL: G12, G14, G15, C51 * Kadir Has University, Faculty of Management, Kadir Has Caddesi, 34083 Fatih Istanbul, Turkey |
Public URL | https://nottingham-repository.worktribe.com/output/40584826 |
Publisher URL | https://onlinelibrary.wiley.com/doi/10.1111/jfir.12317 |
Files
This file is under embargo until Jan 31, 2025 due to copyright restrictions.
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