Risks and Returns of Cryptocurrency

Yukun Liu and Aleh Tsyvinski
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Yukun Liu: Yale University

No 160, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We establish that the risk-return tradeoff of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals. Cryptocurrencies have no exposure to most common stock market and macroeconomic factors or to the returns of currencies and commodities. In contrast, we show that the cryptocurrency returns can be predicted by factors which are specific to cryptocurrency markets – there is a strong time-series momentum effect and proxies for investor attention strongly forecast cryptocurrency returns. Finally, we create an index of exposures to cryptocurrencies of 354 industries in the US and 137 industries in China.

Date: 2019
New Economics Papers: this item is included in nep-pay and nep-rmg
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Citations: View citations in EconPapers (7)

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Working Paper: Risks and Returns of Cryptocurrency (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:160

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