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A Factor Model for Digital Assets

In: Mathematical Research for Blockchain Economy

Author

Listed:
  • Cristian Isac

    (CF Benchmarks Ltd.)

  • Thomas Erdösi

    (CF Benchmarks Ltd.)

  • Warren Han

Abstract

We identify seven factors - market, size, value, momentum, growth, liquidity, and downside beta - that explain cryptocurrency returns, each exhibiting statistically significant risk premia. Within the Fama–French framework, value, momentum, and growth deliver the largest risk premia after the market factor, while size, liquidity, and downside beta yield smaller but positive returns. From an explanatory standpoint, we find the market to be the dominant factor, with value, growth, downside beta, and size adding substantial explanatory power, and the remaining two factors - momentum and liquidity - offering more modest yet complementary contributions. Lastly, Fama–MacBeth regressions confirm the significance of all seven factors, and reveal notable time variation in their associated risk premia, reflecting the evolving structure of the digital asset market.

Suggested Citation

  • Cristian Isac & Thomas Erdösi & Warren Han, 2026. "A Factor Model for Digital Assets," Lecture Notes in Operations Research, in: Stefanos Leonardos & Amir K. Goharshady & William Knottenbelt & Panos Pardalos (ed.), Mathematical Research for Blockchain Economy, pages 63-84, Springer.
    • Handle: RePEc:spr:lnopch:978-3-032-13377-9_4
    DOI: 10.1007/978-3-032-13377-9_4
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