Tracking ‘Pure’ Systematic Risk with Realized Betas for Bitcoin and Ethereum

Bilel Sanhaji and Julien Chevallier
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Julien Chevallier: Economics Department, Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint-Denis, France

Econometrics, 2023, vol. 11, issue 3, 1-36

Abstract: Using the capital asset pricing model, this article critically assesses the relative importance of computing ‘realized’ betas from high-frequency returns for Bitcoin and Ethereum—the two major cryptocurrencies—against their classic counterparts using the 1-day and 5-day return-based betas. The sample includes intraday data from 15 May 2018 until 17 January 2023. The microstructure noise is present until 4 min in the BTC and ETH high-frequency data. Therefore, we opt for a conservative choice with a 60 min sampling frequency. Considering 250 trading days as a rolling-window size, we obtain rolling betas < 1 for Bitcoin and Ethereum with respect to the CRIX market index, which could enhance portfolio diversification (at the expense of maximizing returns). We flag the minimal tracking errors at the hourly and daily frequencies. The dispersion of rolling betas is higher for the weekly frequency and is concentrated towards values of β > 0.8 for BTC ( β > 0.65 for ETH). The weekly frequency is thus revealed as being less precise for capturing the ‘pure’ systematic risk for Bitcoin and Ethereum. For Ethereum in particular, the availability of high-frequency data tends to produce, on average, a more reliable inference. In the age of financial data feed immediacy, our results strongly suggest to pension fund managers, hedge fund traders, and investment bankers to include ‘realized’ versions of CAPM betas in their dashboard of indicators for portfolio risk estimation. Sensitivity analyses cover jump detection in BTC/ETH high-frequency data (up to 25%). We also include several jump-robust estimators of realized volatility, where realized quadpower volatility prevails.

Keywords: realized beta; Bitcoin; Ethereum; capital asset pricing model (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Tracking ‘Pure’ Systematic Risk with Realized Betas for Bitcoin and Ethereum (2023)
Working Paper: Tracking ‘Pure’ Systematic Risk with Realized Betas for Bitcoin and Ethereum (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:11:y:2023:i:3:p:19-:d:1214066

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