Financial Market Efficiency: Equity versus Cryptocurrency before and after Covid-19 Pandemic

The Covid-19 pandemic outbreak may generate differential impacts on global financial markets causing some markets to be more efficient than the others. This paper employs Hurst Exponent as a methodology for measuring financial market efficiency. The literature focused largely on the equity markets such as the stock markets. There is a paucity of studies on the evolving cryptocurrency markets such as Bitcoins. There is also a paucity of studies examining how asset market efficiencies are influenced by the pandemic. We therefore develop testable efficiency market hypotheses for both equities and cryptocurrencies against the backdrop of a large scale global pandemic. We also develop a new theoretical concept in addition to those in the literature for explaining our empirical findings. Our results show that the efficiency level of the cryptocurrency markets is lower than the stock markets. Furthermore, the efficiency level of both the cryptocurrency markets and stock markets decline after the onset of the covid-19 pandemic. The theoretical framework developed in this paper can be used to provide relevant explanations for our empirical results.