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An insight on non-standard asset pricing: does COVID-19 matter in the crypto-asset market?

Author

Listed:
  • Prince Hikouatcha

    (University of Dschang)

  • Guillaume Tchoffo

    (University of Dschang)

  • Vatis Christian Kemezang

    (University of Douala)

  • Jules Roger Feudjo

    (University of Dschang)

Abstract

What factors influence the expected return of crypto-assets amid the COVID-19 pandemic? Can a post-investment risk premium be anticipated? Addressing these questions, we investigate pricing determinants of traditional and technical analysis indicators in a panel of ten major crypto-assets from January 2017 to December 2022. Our research reveals three key insights. First, using the generalized least squares method, it appears that the relative strength index, the average directional index, market capitalization, and liquidity correlate positively with expected returns, while transaction volume and volatility behave oppositely. Second, the risk price related to the relative strength index is globally the most significant one. To some extent, depending on the situation, a significant risk premium could exist for the risk factors associated with volatility, market capitalization, and average directional index. Third, the COVID-19 pandemic sometimes affected the magnitude, sign, and significance of certain risk factors and premiums most especially for large market capitalization crypto-assets. This suggests a flight-to-safety behavior by investors toward larger, established crypto-assets during economic uncertainties. These findings are robust to alternative model specifications and estimation methods. This holds significant implications for investors in the crypto-asset market.

Suggested Citation

  • Prince Hikouatcha & Guillaume Tchoffo & Vatis Christian Kemezang & Jules Roger Feudjo, 2024. "An insight on non-standard asset pricing: does COVID-19 matter in the crypto-asset market?," SN Business & Economics, Springer, vol. 4(3), pages 1-30, March.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:3:d:10.1007_s43546-023-00616-z
    DOI: 10.1007/s43546-023-00616-z
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    Keywords

    Crypto-assets; Expected return; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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