A Statistical Analysis of Cryptocurrencies

30 Pages Posted: 8 Apr 2017 Last revised: 25 Dec 2018

See all articles by Joerg Osterrieder

Joerg Osterrieder

Zurich University of Applied Sciences

Stephen Chan

University of Manchester - School of Mathematics

Jeffrey Chu

University of Manchester - School of Mathematics

Saralees Nadarajah

University of Manchester

Date Written: April 7, 2017

Abstract

We show the statistical properties of the most important cryptocurrencies, of which Bitcoin is the most prominent example. We characterize their exchange rates versus the US Dollar by fitting parametric distributions to them. It is shown that returns are clearly non-normal, however, no single distribution fits well jointly to all the cryptocurrencies analysed. We find that for the most popular currencies, such as Bitcoin and Litecoin, the Generalized hyperbolic distribution gives the best fit, whilst for the smaller cryptocurrencies (determined by market capitalization) the Normal inverse Gaussian distribution, Generalized t distribution, and Laplace distributions give good fits. The results are important for investment and risk management purposes.

Keywords: Exchange rate, Distributions, Blockchain, Bitcoin, Cryptocurrencies

JEL Classification: C1, G00

Suggested Citation

Osterrieder, Joerg and Chan, Stephen and Chu, Jeffrey and Nadarajah, Saralees, A Statistical Analysis of Cryptocurrencies (April 7, 2017). Available at SSRN: https://ssrn.com/abstract=2948315 or http://dx.doi.org/10.2139/ssrn.2948315

Joerg Osterrieder

Zurich University of Applied Sciences ( email )

Economics and Finance
Technikumstrasse 9
Winterthur, 8401
Switzerland

HOME PAGE: http://www.zhaw.ch

Stephen Chan

University of Manchester - School of Mathematics ( email )

United Kingdom

Jeffrey Chu

University of Manchester - School of Mathematics ( email )

Alan Turing Building
School of Mathematics
Manchester, Lancashire M13 9PL
United Kingdom

Saralees Nadarajah (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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