Informational Efficiency With Shock-Induced Structural Breaks in Crypto Prices : An Indian Perspective

This study investigates the weak-form efficiency of both pre-pandemic and pandemic year crypto prices in INR terms, using random walk testing procedures which are robust to external shock-induced structural breaks in the time series, due both to an abrupt transitory shock and to a gradual shift in the series mean over time. Appropriate incorporation of the statistically significant structural breaks suggests characterization of random walk behaviour as against the tendency of mean-reversion in the INR crypto prices. While global crypto market news effects are seen to cause transitory shocks, the more permanent impacts are definitely seen to be linked to the increasing acceptance of the crypto globally. This acceptance features rising participation and developing infrastructure, like setting up of Exchanges and ATMs, as well as key technological developments involving the currencies. It is clear that individual crypto currencies need to be treated differently for policy purposes as different sets of factors could be effecting the trend and level shifts in the price series. While the results refute the possibility of investors persistently earning above-average risk adjusted returns, the findings support the belief that bringing in a set of progressive regulations can help in augmenting efficiency in the crypto market in India and thus globally, as the Indian investor community is large and fast growing in the backdrop of the adverse economic effects of the Covid-19 pandemic