Is geopolitical risk priced in the cross-section of cryptocurrency returns?

Huaigang Long, Ender Demir, Barbara Będowska-Sójka, Adam Zaremba and Syed Jawad Hussain Shahzad

Finance Research Letters, 2022, vol. 49, issue C

Abstract: We examine the role of geopolitical risk in the cross-sectional pricing of cryptocurrencies. We calculate cryptocurrency exposure to changes in the geopolitical risk index and document that coins with the lowest geopolitical beta outperform those with high geopolitical beta. Our findings suggest that risk-averse investors require additional compensation as motivation to hold cryptocurrencies with low and negative geopolitical betas, and they are willing to pay a premium for assets with high and positive geopolitical betas. The effect cannot be explained by known return predictors and is robust to many considerations.

Keywords: Cryptocurrencies; The cross-section of returns; Asset pricing; Geopolitical risk; Return predictability (search for similar items in EconPapers)
JEL-codes: F51 G11 G12 H56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003543

DOI: 10.1016/j.frl.2022.103131

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