Risks and Returns of Cryptocurrency

68 Pages Posted: 6 Aug 2018

See all articles by Yukun Liu

Yukun Liu

University of Rochester - Simon Business School

Aleh Tsyvinski

Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: August 2018

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. They also have no exposure 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. Specifically, we determine that there is a strong time-series momentum effect and that 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.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Liu, Yukun and Tsyvinski, Aleh, Risks and Returns of Cryptocurrency (August 2018). NBER Working Paper No. w24877. Available at SSRN: https://ssrn.com/abstract=3226806

Yukun Liu (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Aleh Tsyvinski

Yale University - Cowles Foundation ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-9163 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
341
Abstract Views
1,669
rank
574,179
PlumX Metrics