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Common Risk Factors in Cryptocurrency

Author

Listed:
  • YUKUN LIU
  • ALEH TSYVINSKI
  • XI WU

Abstract

We find that three factors—cryptocurrency market, size, and momentum—capture the cross‐sectional expected cryptocurrency returns. We consider a comprehensive list of price‐ and market‐related return predictors in the stock market and construct their cryptocurrency counterparts. Ten cryptocurrency characteristics form successful long‐short strategies that generate sizable and statistically significant excess returns, and we show that all of these strategies are accounted for by the cryptocurrency three‐factor model. Lastly, we examine potential underlying mechanisms of the cryptocurrency size and momentum effects.

Suggested Citation

  • Yukun Liu & Aleh Tsyvinski & Xi Wu, 2022. "Common Risk Factors in Cryptocurrency," Journal of Finance, American Finance Association, vol. 77(2), pages 1133-1177, April.
    • Handle: RePEc:bla:jfinan:v:77:y:2022:i:2:p:1133-1177
    DOI: 10.1111/jofi.13119
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