MAX momentum in cryptocurrency markets

Yi Li, Andrew Urquhart, Pengfei Wang and Wei Zhang

International Review of Financial Analysis, 2021, vol. 77, issue C

Abstract: This paper studies the MAX effect, the relationship between maximum daily returns and future returns in the cryptocurrency market. The cryptocurrency market is an ideal setting for the MAX effect due to its lottery-like features (i.e., large positive skewness). Contrary to findings in other markets, we demonstrate that cryptocurrencies with higher maximum daily returns tend to achieve higher returns in the future and call this the “MAX momentum” effect. We also find that the magnitude of the MAX momentum effect varies with market conditions, investor sentiment and the underpricing of cryptocurrencies. Additionally, this effect is robust to longer holding periods, different MAX measures and alternative sample selection criteria.

Keywords: Cryptocurrency; MAX effect; Momentum (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:77:y:2021:i:c:s1057521921001630

DOI: 10.1016/j.irfa.2021.101829

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