Dynamic time series momentum of cryptocurrencies

【Author】 Borgards, Oliver

【Source】NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE

【影响因子】3.136

【Abstract】This paper examines the momentum effect for twenty cryptocurrencies compared to the US stock market. For this purpose, we implement a dynamic modeling approach to define and test momentum periods that follow a formation period for interday and various intraday price levels. We find evidence that large proportions of the asset classes' formation periods are followed by momentum periods, strongly supporting the momentum effect. In particular cryptocurrencies have significantly larger and longer momentum periods in all frequencies which we attribute to the lower derivability of their intrinsic value leading to a higher degree of noise traders in the market. A momentum trading strategy based on the identical approach outperforms a buy-hold strategy for both asset classes, while only cryptocurrencies have higher risk-adjusted returns and lower downside risks than a passive investment. We also find critical price levels during structural elements of the momentum period where the volatility shortly but intensively increases and consequently initiates a price impulse in the direction of the momentum.

【Keywords】Momentum effect; Time-series momentum; Anchoring; Turning point; Cryptocurrency

【发表时间】2021 JUL

【收录时间】2022-01-02

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