Market Efficiency, Behavior and Information Asymmetry: Empirical Evidence from Cryptocurrency and Stock Markets

Abstract

This dissertation is dedicated to the analysis of three superordinate economic principles in varying market environments: market efficiency, the behavior of market participants and information asymmetry. Sustainability and social responsibility have gained importance as investment criteria in recent years. However, responsible investing can lead to conflicting goals with respect to utility-maximizing behavior and portfolio diversification in efficient markets. Conducting a meta-analysis, this thesis presents evidence that positive (non-monetary) side effects of responsible investing can overcome this burden. Next, the impact of the EU-wide regulation of investment research on the interplay between information asymmetry, idiosyncratic risk, liquidity and the role of financial analysts in stock markets is investigated. An empirical analysis of the emerging primary and secondary market for cryptocurrencies yields further insights about the effects of information asymmetry between investors, issuers and traders. The efficient allocation of resources is dependent on the market microstructure, the behavior of market participants, as well as exogenous shocks. Against this background, this thesis is dedicated to the empirical analysis of limit order books, the rationality of traders and the impact of COVID-19. Due to its young history, the market for cryptocurrencies yields a suitable research subject to test classical financial theories. This doctoral thesis reveals parallels between the microstructure of cryptocurrency and stock markets and uncovers some previously unknown statistical properties of the cryptocurrency market microstructure. An initial examination of the impact of COVID-19 further shows that cryptocurrencies with a high market capitalization seem to react to macroeconomic shocks similar to stock markets. This cumulative dissertation comprises six stand-alone papers, of which three papers have already been published.