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Month of the Year Effect in the Cryptocurrency Market and Portfolio Management

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Month of the Year Effect in the Cryptocurrency Market and Portfolio Management ISSN 2519-8564 (рrint), ISSN 2523-451X (online). European Journal of Management Issues. – 2019. – 27 (1-2) European Journal of Management Issues Volume 27(1-2), 2019, pp.29-35 DOI: 10.15421/191904 Received: 23 February 2019 Revised: 06 April 2018; 04 June2019 Accepted: 19 June 2019 Published: 25 June 2019 UDC classification: 336.744 JEL Classification: G12, C63 Month of the year effect in the cryptocurrency market and portfolio management A. Plastun‡, ‡‡ A. Drofa , ‡‡‡ T. Klyushnik Purpose – to investigate the Month of the year effect in the cryptocurrency market. Design/Method/Research Approach. A number of parametric and non-parametric technics are used, including average analysis, Student's t-test, ANOVA, Kruskal-Wallis statistic test, and regression analysis with the use of dummy variables. Findings. In general (case of overall testing – when all data is analyzed at once) calendar the Month of the Year Effect is not present in the cryptocurrency market. But results of separate testing (data from the period “suspicious for being anomaly” with all the rest of the data, except the values which belong to the “anomaly data set”) shows that July and August returns are much lower than returns on other months. These are the worst months to buy Bitcoins. Theoretical implications. Results of this paper claim to find some holes in the efficiency of the cryptocurrency market, which can be exploited. This contradicts the Efficient Market Hypothesis. ‡ Alex Plastun, Practical implications. Results of this paper claim to find some holes Doctor of Economic Sciences, Professor, in the efficiency of the cryptocurrency market, which can be Professor of Chair of International Economic Relations, exploited. This provides opportunities for effective portfolio Sumy State University, Sumy, Ukraine management in the cryptocurrency market. e-mail: [email protected], Originality/Value. This paper is the first to explore Month of the Year ORCID: http://orcid.org/0000-0001-8208-7135 Effect in the cryptocurrency market. ‡‡ Anna Oleksandrivna Drofa, Student, Paper type – empirical. Sumy State University, Sumy, Ukraine e-mail: [email protected] Keywords: Calendar Anomalies; seasonal effects; Efficient Market Hypothesis; Cryptocurrency; Bitcoin. ‡‡‡Tetyana Viktorivna Klyushnik, Student, Authors gratefully acknowledge financial support from the Ministry Sumy State University, Sumy, Ukraine of Education and Science of Ukraine (0117U003936). e-mail: [email protected] Reference to this paper should be made as follows: Plastun, A., Drofa, A., Klyushnik, T. (2019). Month of the year effect in the cryptocurrency market and portfolio management. European Journal of Management Issues, 27(1-2), 29-35. doi:10.15421/191904. ISSN 2519-8564 (рrint), ISSN 2523-451X (online). European Journal of Management Issues. – 2019. – 27 (1-2) Ефект місяця року Эффект месяца года на ринку криптовалют на рынке криптовалют і портфельний менеджмент и портфельный менеджмент Олексій Леонідович Пластун, Алексей Леонидович Пластун, Анна Олександрівна Дрофа, Анна Александровна Дрофа, Тетяна Вікторівна Клюшник Татьяна Викторовна Клюшник Сумський державний університет, Сумский государственный университет, Суми, Україна Сумы, Украина Мета роботи – дослідити ефект місяця року на ринку Цель работы – исследовать эффект месяца года на рынке криптовалют. криптовалют. Дизайн/Метод/Підхід дослідження. Застосовано ряд Дизайн/Метод/Подход исследования. Применен ряд параметричних і непараметричних методів, у тому числі параметрических и непараметрических методов, в том аналіз середніх, t-критерій Стьюдента, ANOVA, числе анализ средних, t-критерий Стьюдента, ANOVA, статистичний тест Крускала-Уолліса, регресійний аналіз із статистический тест Крускала-Уоллиса, регрессионный використанням фіктивних змінних. анализ с использованием фиктивных переменных. Результати дослідження. В цілому (в разі загального Результаты исследования. В целом (в случае общего тестування: всі дані проаналізовано одночасно) ефект тестирования: все данные анализируют одновременно) місяця року не присутній на ринку криптовалют. Але эффект месяца года не присутствует на рынке криптовалют. результати окремого тестування (дані за період порівняно Но результаты отдельного тестирования (данные за период з усіма іншими даними, за винятком значень, які відносять сравнены со всеми остальными данными, за исключением до цього періоду), показали зміну цін на біткоіни в липні і в значений, которые отнесены к этому периоду), показали серпні набагато нижчу, ніж за інші місяці. Це найгірші місяці изменение цен на биткоины в июле и августе намного ниже, для покупки біткоінів. чем за другие месяцы. Это худшие месяцы для покупки Теоретичне значення дослідження. Згідно з результатами биткоина. даного дослідження з’ясовано, що на ринку криптовалют Теоретическое значение исследования. Согласно результатам присутні «провали» в ефективності, які можна застосувати з данного исследования выявлено, что на рынке метою отримання надприбутків. Це суперечить гіпотезі криптовалют существуют «провалы» в эффективности, ефективного ринку. которые можно использовать с целью получения Практичне значення дослідження. Згідно з результатами сверхприбыли. Это противоречит гипотезе эффективного даного дослідження, такі «провали» в ефективності можна рынка. застосувати під час побудови і оптимізації торгових Практическое значение исследования. Согласно результатам стратегій. Це надає можливості для більш ефективного данного исследования, такие «провалы» в эффективности управління інвестиційним портфелем на ринку можно использовать при построении и оптимизации криптовалют. торговых стратегий. Это предоставляет возможности для Оригінальність/Цінність/Наукова новизна дослідження. Ефект более эффективного управления инвестиционным місяця року на ринку криптовалют до цього не розглядався портфелем на рынке криптовалют. в науковій літературі. Оригинальность/Ценность/Научная новизна исследования. Эффект месяца года на рынке криптовалют ранее не Тип статті – емпіричний. рассматривался в научной литературе. Ключові слова: календарні аномалії; сезонні ефекти; Гіпотеза Тип статьи – эмпирический. ефективного ринку; криптовалюти; біткоін. Ключевые слова: календарные аномалии; сезонные эффекты; Автори вдячно визнають фінансову підтримку Міністерства Гипотеза эффективного рынка; криптовалюты; биткоин. освіти і науки України (0117U003936). Авторы выражают благодарность Министерству образования и науки Украины за финансовую поддержку (0117U003936). ISSN 2519-8564 (рrint), ISSN 2523-451X (online). European Journal of Management Issues. – 2019. – 27 (1-2) 1. Introduction Compton et al (2013) analyzing monthly seasonality in the Russian stock market over the period 2000-2010 find strong evidence of a alendar anomalies (the Day of the Week Effect, the Turn of persistent monthly pattern (but no January effect). the Month Effect, the Month of the Year Effect, the January Borowski (2015) analyzed Month of the Year Effect in the Effect, the Holiday Effect, the Halloween Effect etc.) is commodity market and provide evidences in favor of this anomaly. something that shouldn’t exist according to the Efficient Market Hypothesis (EMH, see Fama, 1965). However there are many Contrary to previous results Ali et al (2009) who analyzed Malaysian evidences that they exist in real life (Fields, 1931; Cross, 1973; Jensen, stock index over the period from 1994 to 2004 using GARCH (1 1)-M 1978; French, 1980; Bildik, 2004; Mynhardt & Plastun, 2013; many model can’t find any clear pattern of January effect. Similar results others). are obtained by Alshimmiri (2011) for the case of Kuwait Stock Exchange over the period 1984-2000: no January effect was The Month of the Year Effect (returns vary for different months in detected. a year) is one of the most discussed calendar anomalies for the case of stock market (Gultekin & Gultekin, 1983; Lakonishok & Smidt, But at the same time returns during summer months (May- 1988; Wilson & Jones, 1993; Wachtel, 1942; Giovanis, 2008; Zhang and September) tend to be significantly higher than returns during Jacobsen, 2012; Compton et al, 2013; Caporale & Plastun, 2017). other months of the year (October-April). However to date no study has analysed such issues in the context Wong et al (2006) based on Singapore stock market data over the of the cryptocurrency market. period 1993-2005 reveals that the Month of the Year Effect has largely disappeared. Cryptocurrency market is rather new and might still be relatively inefficient and it might be a good basis for the Month of the Year Silva (2010) explored Portuguese stock market during 1998-2008 Effect existence. and also find no evidences in favor or the January anomaly. We focus in particular on the Month of the Year Effect, and apply a As can be seen the evidences are mixed. Possible explanation is variety of statistical methods (average analysis, Student's t-test, market evolution – anomalies are fading in time (Plastun et al., ANOVA, the Kruskal-Wallis, and regression analysis with dummy 2019). variables) to examine whether or not it exists in the cryptocurrency market. The object of analysis is Bitcoin monthly returns over the The cryptocurrency market represents a particularly interesting period 2013-2019. case being rather new, relatively unexplored and at the same time extremely vulnerable to anomalies, given its high volatility relative The paper is structured as follows: Section 2 briefly reviews the to the FOREX, stock and commodity markets etc. (Cheung et al., literature on the Month
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