Risks and Returns of Cryptocurrency | Zendy

Yukun Liu | Zendy; Aleh Tsyvinski | Zendy

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Risks and Returns of Cryptocurrency

Author(s) -

Yukun Liu,

Aleh Tsyvinski

Publication year - 2018

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.3226952

Subject(s) - cryptocurrency , stock (firearms) , economics , china , stock market , monetary economics , financial economics , econometrics , business , geography , computer science , computer security , context (archaeology) , archaeology

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.

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