Crypto-asset Risks and Returns
August 27, 2018 - Currency Trading
How do the major crypto-assets (Bitcoin, Ripple, and Ethereum) stack up against conventional asset classes? In their August 2018 paper entitled “Risks and Returns of Cryptocurrency”, Yukun Liu and Aleh Tsyvinski apply standard tools of asset pricing to measure crypto-asset exposures to:
- 160 equity factors.
- Macroeconomic factors (non-durable consumption growth, durable consumption growth, industrial production growth, and personal income growth).
- Major non-U.S. currencies (Australian Dollar, Canadian Dollar, Euro, Singapore Dollar and UK Pound).
- Precious metals (gold, platinum and silver).
They also investigate potential predictors for cryptocurrency returns analogous to those of traditional asset classes (momentum, investor attention, price-to-“dividend” ratio, realized volatility and supply). Finally, they measure exposures of various industries to crypto-asset returns. Using daily crypto-asset prices for Bitcoin since January 2011 and for Ripple and Ethereum since early August 2013, all through May 2018, along with contemporaneous data for other variables as outlined above, they find that: Keep Reading