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Publication date
2023-06Rights
© 2023 The Southern Finance Association and the Southwestern Finance Association. This is the peer reviewed version of the following article: Tiniç M, Sensoy A, Akyildirim E et al (2023) Adverse selection in cryptocurrency markets. The Journal of Financial Research. Accepted for Publication., which has been published in final form at https://doi.org/10.1111/jfir.12317. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.Peer-Reviewed
YesOpen Access status
openAccessAccepted for publication
11/01/2023
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This paper investigates the influence that information asymmetry may possess upon the 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. Our results also suggest that adverse selection costs, on average, correspond to ten percent of the estimated effective spread, indicating an economically significant impact of adverse selection risk on transaction costs in cryptocurrency markets. We finally document that adverse selection costs are important predictors of intraday volatility, liquidity, market toxicity, and returns.Version
Accepted manuscriptCitation
Tiniç M, Sensoy A, Akyildirim E et al (2023) Adverse selection in cryptocurrency markets. The Journal of Financial Research. 46(2): 497-546.Link to Version of Record
https://doi.org/10.1111/jfir.12317Type
Articleae974a485f413a2113503eed53cd6c53
https://doi.org/10.1111/jfir.12317