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Risks and Returns of Cryptocurrency

Yukun Liu and Aleh Tsyvinski
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Yukun Liu: Yale University
Aleh Tsyvinski: 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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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:160

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More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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