BRL Working Paper Series
On this page, you can find all published working papers of the Blockchain Research Lab. Feel free to download them by clicking on the picture and share them.
Discovering market prices: Which price formation model best predicts the next trade?
June 2019 – Working Paper No. 2
For most purposes of technical analysis, valuation metrics and many other relevant financial methods, the price of the last transaction is considered representative of the market price. The straightforward argument is that at this price, supply and demand have last met. However, on closer examination, the question arises as to why a past event should be relevant to the future, and why other, potentially more recent information should not be used to discover a future price. Building on this question, we apply a range of new price formation models to current data available on crypto currency exchanges that depict level II market data, and compare their short-term forecast accuracy against the common-used ticker price and mid-price. Data on crypto currencies is used as the closest example to free markets, since crypto currency trading is continuous, markets never close, and interferences through oversight is extremely rare. We find that two of the five price formation models investigated outperform the widely used ticker as a price indicator for the next trade. We conclude that the volume-limited clearing price best predicts the price of subsequent trades. Its usage can thus enhance the explanatory power of various financial analyses.
Cheap Signals in Security Token Offerings (STOs)
February 2019 – Working Paper No. 1
Blockchain-based security token offerings (STOs) provide a new way of crowdfunding and corporate financing. Building on signalling theory, this paper examines 1) whether companies conducting an STO make use of cheap signals to influence investment behaviour and 2) if such use of cheap signals is effective. We analyse a dataset of 151 STOs and identify that cheap signals of human capital and social media are used by projects and have a positive effect on funding success, while cheap signals of external network size negatively affect funding success. We argue that these signals can be exploited by STOs to influence investor behaviour raising concerns for investor protection.