Cross-sectional reversal portfolios in the cryptocurrency market and market uncertainty


27 Pages Posted: 21 Nov 2024 Last revised: 9 Dec 2024

See all articles by Kei Nakagawa

Kei Nakagawa

Nomura Asset Mamagement Co,Ltd

Ryuta Sakemoto

Hokkaido University

Date Written: December 09, 2024

Abstract

This study explores whether a behavioral approach can enhance the profitability of cross-sectional reversal strategy in the cryptocurrency market. Building on findings from stock and commodity futures markets, we propose a new decomposition method for reversal portfolios where the highest and lowest prices during the formation periods serve as anchoring points. We find that these reversal portfolios generate higher returns than conventional cross-sectional momentum and reversal portfolios. These results hold across different portfolio formation periods, suggesting the presence of heterogeneous investment horizons. Moreover, our cryptocurrency reversal portfolios act as a hedge against increases in stock and gold market uncertainty.

Keywords: Cryptocurrencies, Reversal, Momentum, Behavioral Finance, Market uncertainty

Suggested Citation

Nakagawa, Kei and Sakemoto, Ryuta,

Cross-sectional reversal portfolios in the cryptocurrency market and market uncertainty


(December 09, 2024). Available at SSRN: https://ssrn.com/abstract=5001299 or http://dx.doi.org/10.2139/ssrn.5001299

Kei Nakagawa

Nomura Asset Mamagement Co,Ltd ( email )

2-2-1, Toyosu
Koto-ku, Tokyo 135-0061
Japan

HOME PAGE: http://https://scholar.google.co.jp/citations?user=SDYNtbAAAAAJ&hl=ja

Ryuta Sakemoto (Contact Author)

Hokkaido University ( email )

5 Kita 8 Jonishi, Kita Ward
Hokkaido Prefecture
Sapporo, Hokkaido 060-0808
Japan

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