The application of three asset pricing models to cryptocurrencies
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2022-08-25
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en
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Abstract
ARE TRADITIONAL ASSETS PRICING MODELS ALSO USEABLE TOOLS IN EXPLAINING THE RETURNS OF CRYPTOCURRENCY? TO ANSWER THIS QUESTION, THREE ASSET PRICING MODELS ARE COMPARED. BY USING TIME SERIES AND CROSS SECTIONAL REGRESSIONS, WE FIND THAT THE CAPM DOES A REASONABLE JOB IN EXPLAINING CRYPTOCURRENCY RETURNS WHILE THE FAMA AND FRENCH THREE FACTOR MODEL AND THE CARHART FOUR FACTOR MODEL SHOW LITTLE ADDITIONAL EXPLANATORY POWER. WE ALSO CONSTRUCTED RISK FACTORS IN DIFFERENT WAYS AND SHOWED THAT THIS CAN LEAD TO HETEROGENEOUS RESULTS. RESULTS WERE ROBUST WHEN THE PORTFOLIOS WERE SORTED BY VOLATILITY INSTEAD OF SIZE/NVT RATIO.
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Faculteit der Managementwetenschappen