Resale Option and Cryptocurrency Mispricing

37 Pages Posted: 28 Sep 2018

See all articles by Wang Chun Wei

Wang Chun Wei

University of Queensland - Faculty of Business, Economics and Law; University of Queensland - Finance

Date Written: September 21, 2018


We examine the predictions of the resale option hypothesis (Scheinkman and Xiong, 2003) in cryptocurrency markets. The resale option hypothesis yields testable implications on the relationship between the level and volatility of mispricing, and the degree of heterogeneous beliefs. Using turnover as a proxy for heterogeneity, we find evidence supporting the resale option hypothesis. These findings are persistent across various types of cryptocurrencies, and support the notion that cryptocurrencies trade above intrinsic value. Futhermore, we conduct two backtests to show that portfolios with higher turnover or resale option characteristics underperform portfolios with lower turnover or resale option characteristics. This supports the theory that disagreement is negatively related to future returns for positive biased assets (see Atmaz and Basak, 2018).

Keywords: Turnover, Mispricing, Heterogeneous Beliefs, Resale Option Hypothesis, Cryptocurrencies, Bitcoin

JEL Classification: C01, G12, G14

Suggested Citation

Wei, Wang Chun, Resale Option and Cryptocurrency Mispricing (September 21, 2018). Available at SSRN: or

Wang Chun Wei (Contact Author)

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland

University of Queensland - Finance ( email )


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