Common Risk Factors in Cryptocurrency

55 Pages Posted: 14 Jun 2019 Last revised: 10 Jun 2021

See all articles by Yukun Liu

Yukun Liu

University of Rochester - Simon Business School

Aleh Tsyvinski

Yale University - Cowles Foundation

Xi Wu

Haas School of Business, University of California Berkeley

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2019

Abstract

We find that three factors – cryptocurrency market, size, and momentum – capture the cross-sectional expected cryptocurrency returns. We consider a comprehensive list of price- and market-related return predictors in the stock market, and construct their cryptocurrency counterparts. Ten cryptocurrency characteristics form successful long-short strategies that generate sizable and statistically significant excess returns, and we show that all of these strategies are accounted for by the cryptocurrency three-factor model. Lastly, we examine potential underlying mechanisms of the cryptocurrency size and momentum effects.

Suggested Citation

Liu, Yukun and Tsyvinski, Aleh and Wu, Xi, Common Risk Factors in Cryptocurrency (April 15, 2019). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3379131 or http://dx.doi.org/10.2139/ssrn.3379131

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)

Xi Wu

Haas School of Business, University of California Berkeley ( email )

United States

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