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On the return distributions of a basket of cryptocurrencies and subsequent implications

Author

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  • Börner, Christoph J.
  • Hoffmann, Ingo
  • Kürzinger, Lars M.
  • Schmitz, Tim

Abstract

This study evaluates the risk associated with capital allocation in cryptocurrencies (CCs) using a basket of 27 CCs and the CC index EWCI-. We apply basic statistical tests to model the body distribution of CC returns. Consistent with prior research, the stable distribution (SDI) is the most suitable model for the body distribution. However, due to less favorable properties in the tail area for high quantiles, the generalized Pareto distribution is employed. A combination of both distributions is utilized to calculate Value at Risk and Conditional Value at Risk, revealing distinct risk characteristics in two subgroups of CCs.

Suggested Citation

  • Börner, Christoph J. & Hoffmann, Ingo & Kürzinger, Lars M. & Schmitz, Tim, 2025. "On the return distributions of a basket of cryptocurrencies and subsequent implications," Research in Economics, Elsevier, vol. 79(1).
    • Handle: RePEc:eee:reecon:v:79:y:2025:i:1:s1090944325000055
    DOI: 10.1016/j.rie.2025.101028
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    References listed on IDEAS

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    More about this item

    Keywords

    Body-/Tail-models; Cryptocurrencies; Index construction; Market segmentation; Statistical tests;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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