An analysis of price discovery between Bitcoin futures and spot prices
B. Kapar and J. Olmo (2019). An analysis of price discovery between Bitcoin futures and spot prices. Economics Letters 174, 62-64.
This paper analyzes the Bitcoin price discovery process. We collect data on futures and spot prices for
the period December 2017 to May 2018 and compute Hasbrouck’s information share and Gonzalo and
Granger’s common factor component to quantify the contribution of each market to the price discovery
process. Both measures coincide in suggesting that the Bitcoin futures market dominates the price
discovery process. We also find that both prices are driven by a common factor that is given by a weighted
combination of the futures and spot market. Finally, we observe that deviations from the equilibrium
condition equating the futures and spot log-price have predictive ability for the return on the Bitcoin spot
price but not on the futures price.
This paper analyzes the Bitcoin price discovery process. We collect data on futures and spot prices for
the period December 2017 to May 2018 and compute Hasbrouck’s information share and Gonzalo and
Granger’s common factor component to quantify the contribution of each market to the price discovery
process. Both measures coincide in suggesting that the Bitcoin futures market dominates the price
discovery process. We also find that both prices are driven by a common factor that is given by a weighted
combination of the futures and spot market. Finally, we observe that deviations from the equilibrium
condition equating the futures and spot log-price have predictive ability for the return on the Bitcoin spot
price but not on the futures price.