Downside Risk in Cryptocurrency Market

23 Pages Posted: 2 Jul 2020

See all articles by Victoria Dobrynskaya

Victoria Dobrynskaya

National Research University Higher School of Economics

Date Written: March 2020


I look at the cryptocurrency market through the prism of standard multi-factor asset-pricing models with particular attention to the downside market risk. The analysis for 1,700 coins reveals that there is a significant heterogeneity in the exposure to the downside market risk, and that a higher downside risk exposure is associated with higher average returns. The extra downside risk is priced with a statistically significant premium in cross-sectional regressions. Adding the downside risk component to the CAPM and the 3-factor model for cryptocurrencies improves the explanatory power of the models significantly. The downside risk is orthogonal to the size and momentum risks and constitutes an important forth component in the multi-factor cryptocurrency pricing model.

Keywords: Cryptocurrency, Coins, Crypto-finance, Alternative Investments, Downside Risk, DR-CAPM

JEL Classification: D14, G12, G15

Suggested Citation

Dobrynskaya, Victoria, Downside Risk in Cryptocurrency Market (March 2020). Available at SSRN: or

Victoria Dobrynskaya (Contact Author)

National Research University Higher School of Economics ( email )

26, Shabolovka st.
Moscow, 119017


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