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Native Market Factors for Pricing Cryptocurrencies

Abstract
The cryptocurrency market has been growing frantically in number of cryptocurrencies online exchanges and market capitalization which has amplified the need for comprehensive and robust pricing models. Using a database of all eligible cryptocurrencies listed on the CoinMarketCap website we study the relationship between returns and several potential pricing factors such as size (market capitalization) momentum liquidity and maturity. The analysis was conducted from December 27 2013 to December 29 2020 using weekly data for 3667 cryptocurrencies. Results point out that portfolios of cryptocurrencies with smaller market capitalization higher reversal lower liquidity and lower maturity tend to offer higher returns. The 5-factor model that additionally includes illiquidity and maturity performs better than the 3-factor model previously proposed in the literature meaning that illiquidity and maturity significantly help capture the cross-sectional cryptocurrency risk premia. The 5-factor model presented seems robust to different procedures to construct portfolios and factors.
Authors
Tomé Lima and Helder Sebastião Tomé Lima: Service Delivery Manager at FundsDLT Luxembourg Helder Sebastião: Univ Coimbra CeBER Faculty of Economics
Keywords
Bitcoin ; cryptocurrencies ; asset pricing ; factor models. (search for similar items in EconPapers)
Rank
0.81
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Factor Model
Series
Notas Económicas 2023 issue 57 71-85
Time Added
2024/03/11 03:46
Total Downloads
0
Year Published
2023
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