재무연구 제 32권 3호 (2019년 8월)
Asian Review of Financial Research, Vol.32, No.3.
pp.383~400
vol.32 no.3
pp.383~400
An Investigation of Dynamic Price Movements of the Cryptocurrency Coin in Korea
Geesun Lee Ph.D Candidate, School of Business Administration, Korea University
Denis Yongmin Joe Assistant Professor, School of Business Administration, Korea University
Jinho Jeong Professor, School of Business Administration, Korea University
This paper investigates the dynamic price movements of cryptocurrency market in Korea by employing asymmetric DCC multivariate GARCH and risk decomposition model to reflect the time-varying integration process. We find that the law of one price does not hold between Korean and developed markets like U.S. and Japan, implying that emerging cryptocurrency market can be exploited as a scapegoat of arbitragers. Specifically, the price spreads of 20 to 30 percent between BTC-KRW and BTC-USD persist, exhibiting a sign of economic speculative bubble in Korean cryptocurrency market. Additionally, while there are significant price and volatility spillover effects between cryptocurrency markets of U.S. and Japan, the feedback effects do not exist in the case of Korean market. Our analyses also indicate that the pricing in Korea is mostly based on domestic factors rather than global factors. Finally, we show that this arbitrage opportunity in Korean market has disappeared after a government regulation, which includes banning foreigners and minors from opening new cryptocurrency accounts and prohibiting initial coin offerings (ICOs). The results suggest that a suitable regulation is important to eliminate bubbles.
Geesun Lee
Denis Yongmin Joe
Jinho Jeong
This paper investigates the dynamic price movements of cryptocurrency market in Korea by employing asymmetric DCC multivariate GARCH and risk decomposition model to reflect the time-varying integration process. We find that the law of one price does not hold between Korean and developed markets like U.S. and Japan, implying that emerging cryptocurrency market can be exploited as a scapegoat of arbitragers. Specifically, the price spreads of 20 to 30 percent between BTC-KRW and BTC-USD persist, exhibiting a sign of economic speculative bubble in Korean cryptocurrency market. Additionally, while there are significant price and volatility spillover effects between cryptocurrency markets of U.S. and Japan, the feedback effects do not exist in the case of Korean market. Our analyses also indicate that the pricing in Korea is mostly based on domestic factors rather than global factors. Finally, we show that this arbitrage opportunity in Korean market has disappeared after a government regulation, which includes banning foreigners and minors from opening new cryptocurrency accounts and prohibiting initial coin offerings (ICOs). The results suggest that a suitable regulation is important to eliminate bubbles.
