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      Pricing efficiency and asymmetric multifractality of major asset classes before and during COVID-19 crisis

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      Author(s)
      Mensi, Walid
      Sensoy, Ahmet
      Vo, Xuan Vinh
      Kang, Sang Hoon
      Date
      2022-11-10
      Source Title
      North American Journal of Economics and Finance
      Print ISSN
      1062-9408
      Electronic ISSN
      1879-0860
      Publisher
      Elsevier
      Volume
      62
      Pages
      1 - 18
      Language
      English
      Type
      Article
      Item Usage Stats
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      Abstract
      We examine the impact of COVID-19 pandemic crisis on the pricing efficiency and asymmetric multifractality of major asset classes (S&P500, US Treasury bond, US dollar index, Bitcoin, Brent oil, and gold) within a dynamic framework. Applying permutation entropy on intraday data that covers between April 30, 2019 and May 13, 2020, we show that efficiency of all sample asset classes is deteriorated with the outbreak, and in most cases this deterioration is significant. Results are found to be robust under different analysis schemes. Brent oil is the highest efficient market before and during crisis. The degree of efficiency is heterogeneous among all markets. The analysis by an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach shows evidence of asymmetric multifractality in all markets which rise with the scales. The inefficiency is higher during downward trends before the pandemic crisis as well as during COVID-19 except for gold and Bitcoin. Moreover, the pandemic intensifies the inefficiency of all markets except Bitcoin. Findings reveal increased opportunities for price predictions and abnormal returns gains during the COVID-19 outbreak.
      Keywords
      A-MF-DFA
      COVID-19
      Efficient market hypothesis
      Permutation entropy
      Predictability
      Permalink
      http://hdl.handle.net/11693/111633
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      • Department of Management 639
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