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Exploring the short-term momentum effect in the cryptocurrency market

Author

Listed:
  • Ha Nguyen

    (University of Wollongong)

  • Bin Liu

    (University of Wollongong)

  • Nirav Y. Parikh

    (RMIT University)

Abstract

This study explores the short-term momentum effect in the cryptocurrency market. Utilising a comprehensive cryptocurrency dataset and the portfolio construction methods of Fama and French (J Financ Econ 33:3–56, 1993) and Carhart (J Finance 52:57–82, 1997), we construct cryptocurrency portfolios and examine their performance. The main findings are: (1) the cryptocurrency market portfolio significantly outperforms major stock markets globally in terms of risk-adjusted return; (2) from an asset pricing perspective, short-term momentum effects are significantly priced in the cryptocurrency market, while size effects are controlled, suggesting that the short-term momentum effect explains variations in the returns of cryptocurrency portfolios; and (3) the portfolios constructed according to the short-term momentum effect do not outperform the cryptocurrency market portfolio.

Suggested Citation

  • Ha Nguyen & Bin Liu & Nirav Y. Parikh, 2020. "Exploring the short-term momentum effect in the cryptocurrency market," Evolutionary and Institutional Economics Review, Springer, vol. 17(2), pages 425-443, July.
    • Handle: RePEc:spr:eaiere:v:17:y:2020:i:2:d:10.1007_s40844-020-00176-z
    DOI: 10.1007/s40844-020-00176-z
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    More about this item

    Keywords

    Cryptocurrency; Bitcoin; Momentum; Asset pricing; Portfolio performance; Portfolio management; JEL classification: G11; G12;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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