Ramadan effect in the cryptocurrency markets

Abstract

PurposeThis paper examines the effect of the holy month of Ramadan on the returns and conditional volatility of cryptocurrency markets.Design/methodology/approachThe closing prices of six cryptocurrencies have been considered. The study employs different classical tests for checking if the efficiency behaviour is similar during Ramadan celebration days and non-Ramadan days. Besides, dummy variable regression technique for assessing this anomaly on returns and volatilities has been applied.FindingsAlthough no significant effect on returns and volatility for Litecoin has been found, the results provide evidence about the existence of the Ramadan effects in cryptocurrency markets. The results of the mean equations show the existence of Ramadan effect for Ethereum, Ripple, Stellar and BinanceCoin for all considered models. Significant effect on Bitcoin returns is found with an autoregressive model of order 1. The results of conditional volatility show Ramadan effect on volatility is not detected.Originality/valueFirst, a new contribution in the incipient study of cryptocurrency analysis. Second, a comprehensive review of recently published empirical articles about Ramadan effect on traditional assets has been carried out. Third, unlike most of the papers focussed on the study of Bitcoin, this study has been extended to six cryptocurrencies. Ramadan effect have not been analysed in cryptomarkets yet. This study come to fill this gap and analyses Ramadan effect, previously documented for traditional assets, in particular, stock index from Muslim countries, but not yet analysed in the cryptocurrency markets.