On the return distributions of a basket of cryptocurrencies and subsequent implications

Christoph J. Börner, Ingo Hoffmann, Lars M. Kürzinger and Tim Schmitz

Research in Economics, 2025, vol. 79, issue 1

Abstract: This study evaluates the risk associated with capital allocation in cryptocurrencies (CCs) using a basket of 27 CCs and the CC index EWCI-. We apply basic statistical tests to model the body distribution of CC returns. Consistent with prior research, the stable distribution (SDI) is the most suitable model for the body distribution. However, due to less favorable properties in the tail area for high quantiles, the generalized Pareto distribution is employed. A combination of both distributions is utilized to calculate Value at Risk and Conditional Value at Risk, revealing distinct risk characteristics in two subgroups of CCs.

Keywords: Body-/Tail-models; Cryptocurrencies; Index construction; Market segmentation; Statistical tests (search for similar items in EconPapers)
JEL-codes: C12 C13 C43 E22 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:79:y:2025:i:1:s1090944325000055

DOI: 10.1016/j.rie.2025.101028

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