Macro factors in the returns on cryptocurrencies
17 Pages Posted: 2 Feb 2021 Last revised: 13 Apr 2021
Date Written: December 16, 2020
This study investigates the relationship between expected returns on cryptocurrencies and macroeconomic fundamentals.
We employ a dynamic factor model and summarize information as common factors.
We find that the common factors are strongly linked to the cryptocurrency expected returns at a quarterly frequency, while we do not observe this relationship using macroeconomic indicators such as inflation and money supply. This suggests that macroeconomic information matters in the longer term, which contrasts with the previous literature that explores a short-term relationship.
Keywords: Cryptocurrencies, Macroeconomic Factor, Factor Model
JEL Classification: G10, G11, G17
Suggested Citation: Suggested Citation