 Cryptocurrency anomalies and economic constraintsChristian Fieberg, Gerrit Liedtke and Adam Zaremba International Review of Financial Analysis, 2024, vol. 94, issue C Abstract: The asset pricing literature documents a growing list of predictable patterns in the cross-section of cryptocurrency returns. But can they be forged into viable trading profits? We answer this question by examining the interplay between economic restrictions and return predictability in cryptocurrency markets. We find that size and volume anomalies originate from micro-cap coins of negligible economic importance. Conversely, the momentum effect prevails in larger cryptocurrencies but incurs substantial trading costs and extracts alphas largely from short positions. Most abnormal returns occur primarily in bull markets and fade over time. Therefore, protocols for identifying tradable cryptocurrency anomalies should focus on long positions, account for transaction costs, consider hard-to-trade coins, and emphasize performance in recent years. Keywords: Cryptocurrency markets; Asset pricing; Anomalies; Return predictability; Economic constraints; Trading costs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:94:y:2024:i:c:s1057521924001509 DOI: 10.1016/j.irfa.2024.103218 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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