The Bitcoin Premium: A Persistent Puzzle

Matthew Wilson

The B.E. Journal of Macroeconomics, 2024, vol. 24, issue 1, 135-148

Abstract: On average, stocks have a much higher rate of return than bonds; this has led to research on the equity premium puzzle. Similarly, Bitcoin outperforms stocks; I call this the Bitcoin premium puzzle. I show that standard macroeconomic models predict a low or negative Bitcoin premium. Though Bitcoin is extremely volatile, the model is rejected even when the coefficient of relative risk aversion is above 10. The Bitcoin premium declined after a structural break in late 2013. However, the puzzle is persistent; there has been no downward trend in the premium since.

Keywords: Bitcoin; stocks; asset-pricing puzzles (search for similar items in EconPapers)
JEL-codes: E2 G1 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/bejm-2023-0107

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