COVID-19 and Market Efficiency in Stocks and Cryptocurrencies

Summary

This study examines whether the COVID-19 pandemic affected market efficiency across stock and cryptocurrency markets. It analyzes price returns, absolute returns, and volatility increments using Hurst exponents, and assesses multifractality in the return series. The sample includes several stock indices and a volatility index, along with Bitcoin and Ethereum.

The reported effects differ by market and measure. In stocks, the pandemic affected Hurst exponents for returns and absolute returns in most of the examined markets, but not for volatility increments; returns in the Shanghai market were also unaffected. For Bitcoin and Ethereum, Hurst exponents did not change across the examined series, while multifractality strength shifted for returns and absolute returns. The authors caution that some Hurst series declined gradually over time, so dividing data into pandemic periods can mistakenly attribute an existing trend to the pandemic. The text gives no details on sample dates or statistical procedures beyond these measures.

Key ideas

• The study tests pandemic-era changes in market efficiency using returns, absolute returns, and volatility increments.\nIt uses Hurst exponents and multifractality to characterize series behavior.\nReported effects vary across stock markets, cryptocurrencies, and the measures analyzed.\nCryptocurrency Hurst exponents were unchanged, while multifractality in returns and absolute returns was affected.\nGradual trends in Hurst estimates can confound analyses that compare pandemic periods.

Tags

# 2504.18960


# Impact of the COVID-19 pandemic on the financial market efficiency of price returns, absolute returns, and volatility increment: Evidence from stock and cryptocurrency markets









This study examines the impact of the coronavirus disease 2019 (COVID-19) pandemic on market efficiency by analyzing three time series -- price returns, absolute returns, and volatility increments -- in stock (Deutscher Aktienindex, Nikkei 225, Shanghai Stock Exchange (SSE), and Volatility Index) and cryptocurrency (Bitcoin and Ethereum) markets. The effect is found to vary by asset class and market. In the stock market, while the pandemic did not influence the Hurst exponent of volatility increments, it affected that of returns and absolute returns (except in the SSE, where returns remained unaffected). In the cryptocurrency market, the pandemic did not alter the Hurst exponent for any time series but influenced the strength of multifractality in returns and absolute returns. Some Hurst exponent time series exhibited a gradual decline over time, complicating the assessment of pandemic-related effects. Consequently, segmented analyses by pandemic periods may erroneously suggest an impact, warranting caution in period-based studies.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.