On the Performance of Cryptocurrency Funds

49 Pages Posted: 10 Apr 2020 Last revised: 10 Feb 2022

See all articles by Daniele Bianchi

Daniele Bianchi

School of Economics and Finance, Queen Mary University of London

Mykola Babiak

Lancaster University Management School

Date Written: February 9, 2022

Abstract

We investigate the performance of funds that specialise in cryptocurrency markets. In doing so, we contribute to a growing literature that aims to understand the value of digital assets as investments. The main empirical results support the argument that cryptocurrency funds generate significantly positive alphas compared to passive benchmarks or conventional risk factors. To understand whether the fund managers have sufficient skills to more than cover their costs, we compare the actual fund alphas against the simulated values from a panel semi-parametric bootstrap approach. The analysis shows that the extreme outperformance is unlikely to be explained by the luck of fund managers. However, the significance of the alphas becomes statistically weaker after considering the cross-sectional correlation in fund returns.

Keywords: Cryptocurrency markets, Alternative investments, Fund management, Bootstrap methods.

JEL Classification: G12, G17, E44, C58

Suggested Citation

Bianchi, Daniele and Babiak, Mykola, On the Performance of Cryptocurrency Funds (February 9, 2022). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3559092 or http://dx.doi.org/10.2139/ssrn.3559092

Daniele Bianchi (Contact Author)

School of Economics and Finance, Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

HOME PAGE: http://whitesphd.com

Mykola Babiak

Lancaster University Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

HOME PAGE: http://https://sites.google.com/site/mykolababiak/home

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