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Common Risk Factors in Cryptocurrency

Yukun Liu, Aleh Tsyvinski and Xi Wu

Journal of Finance, 2022, vol. 77, issue 2, 1133-1177

Abstract: We find that three factors—cryptocurrency market, size, and momentum—capture the cross‐sectional expected cryptocurrency returns. We consider a comprehensive list of price‐ and market‐related return predictors in the stock market and construct their cryptocurrency counterparts. Ten cryptocurrency characteristics form successful long‐short strategies that generate sizable and statistically significant excess returns, and we show that all of these strategies are accounted for by the cryptocurrency three‐factor model. Lastly, we examine potential underlying mechanisms of the cryptocurrency size and momentum effects.

Date: 2022
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Handle: RePEc:bla:jfinan:v:77:y:2022:i:2:p:1133-1177