Native Market Factors for Pricing Cryptocurrencies
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 stud...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Coimbra University Press
2024-02-01
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| Series: | Notas Económicas |
| Subjects: | |
| Online Access: | https://impactum-journals.uc.pt/notaseconomicas/article/view/14048 |
| _version_ | 1797302007851122688 |
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| author | Tomé Lima Helder Sebastião |
| author_facet | Tomé Lima Helder Sebastião |
| author_sort | Tomé Lima |
| collection | DOAJ |
| description |
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 3'667 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.
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| first_indexed | 2024-03-07T23:30:42Z |
| format | Article |
| id | doaj.art-8629926347ec4e21a60da7fe611d5998 |
| institution | Directory Open Access Journal |
| issn | 0872-4733 2183-203X |
| language | English |
| last_indexed | 2024-03-07T23:30:42Z |
| publishDate | 2024-02-01 |
| publisher | Coimbra University Press |
| record_format | Article |
| series | Notas Económicas |
| spelling | doaj.art-8629926347ec4e21a60da7fe611d59982024-02-20T15:52:51ZengCoimbra University PressNotas Económicas0872-47332183-203X2024-02-015710.14195/2183-203X_57_3Native Market Factors for Pricing CryptocurrenciesTomé Lima0Helder Sebastião1FundsDLTUniversity of Coimbra 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 3'667 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. https://impactum-journals.uc.pt/notaseconomicas/article/view/14048Bitcoincryptocurrenciesasset pricingfactor models |
| spellingShingle | Tomé Lima Helder Sebastião Native Market Factors for Pricing Cryptocurrencies Notas Económicas Bitcoin cryptocurrencies asset pricing factor models |
| title | Native Market Factors for Pricing Cryptocurrencies |
| title_full | Native Market Factors for Pricing Cryptocurrencies |
| title_fullStr | Native Market Factors for Pricing Cryptocurrencies |
| title_full_unstemmed | Native Market Factors for Pricing Cryptocurrencies |
| title_short | Native Market Factors for Pricing Cryptocurrencies |
| title_sort | native market factors for pricing cryptocurrencies |
| topic | Bitcoin cryptocurrencies asset pricing factor models |
| url | https://impactum-journals.uc.pt/notaseconomicas/article/view/14048 |
| work_keys_str_mv | AT tomelima nativemarketfactorsforpricingcryptocurrencies AT heldersebastiao nativemarketfactorsforpricingcryptocurrencies |