Common risk factors in the returns on cryptocurrencies

Weiyi Liu, Xuan Liang and Guowei Cui

Economic Modelling, 2020, vol. 86, issue C, 299-305

Abstract: This paper identifies three common risk factors in the returns on cryptocurrencies, which are related to cryptocurrency market return, market capitalization (size) and momentum of cryptocurrencies. Investigating a collection of 78 cryptocurrencies, we find that there are anomalous returns that decrease with size and increase with return momentum, and the momentum effect is more significant in small cryptocurrencies. Moreover, Fama-Macbeth regressions show the size and momentum combine to capture the cross-sectional variation in average cryptocurrency returns. In the tests of the three-factor model, we find most cryptocurrencies and their portfolios have significant exposures to the proposed three factors with insignificant intercepts, demonstrating that the three factors explain average cryptocurrency returns very well.

Keywords: Cryptocurrency; Market return; Size; Momentum; Factor model (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:86:y:2020:i:c:p:299-305

DOI: 10.1016/j.econmod.2019.09.035

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