A0939
Title: An analysis of the return volume relationship in decentralized finance (DeFi)
Authors: Yuanyuan Zhang - University of Manchester (United Kingdom) [presenting]
Jeffrey Chu - Renmin University of China (China)
Stephen Chan - American University of Sharjah (United Arab Emirates)
Abstract: The decentralized finance sector has recently experienced a surge in popularity and has emerged from the shadows of the cryptocurrency space. The quantile-on-quantile regression and an extreme value theory approach are implemented to examine the relationship between the daily returns of the prices and trading volumes of decentralized finance tokens at varying quantiles and at the extreme tails. Results suggest that when trading volume is experiencing large increases, the returns of the prices of tokens appear to be significantly positive for some cases but negative for others. The extreme volume-return dependence is found to be asymmetric in the extreme negative and positive tails of the distributions, where the dependence below extreme negative thresholds is essentially non-existent, but above extreme positive thresholds, it is significant. This asymmetric extreme dependence between returns and volume may be beneficial for developing trading strategies that incorporate trading volume data and may indicate an inefficient market.
