Evolutionary correlation, regime switching, spectral dynamics and optimal trading strategies for cryptocurrencies and equities

【Author】 James, Nick

【Source】PHYSICA D-NONLINEAR PHENOMENA

【影响因子】3.751

【Abstract】This paper uses new and recently established methodologies to study the evolutionary dynamics of the cryptocurrency market, and compares the findings with that of the equity market. We begin by applying random matrix theory and principal components analysis (PCA) to correlation matrices of both collections, highlighting clear differences in the eigenspectra exhibited. We then explore the heterogeneity of both asset classes, studying the time-varying dynamics of underlying sector behaviours, and determine the collective similarity within each collection. We then turn to a study of structural break dynamics and evolutionary power spectra, where we quantify the collective affinity in structural breaks and evolutionary behaviours of underlying sector time series. Finally, we implement two algorithms simulating 'portfolio choice' dynamics to compare the effectiveness of stock selection and sector allocation in cryptocurrency portfolios. There, we highlight the importance of both endeavours and comment on noteworthy implications for cryptocurrency portfolio management. (C) 2022 Elsevier B.V. All rights reserved.

【Keywords】Time series analysis; Random matrix theory; Regime switching; Trading strategies; Financial markets; Cryptocurrency

【发表时间】2022 JUN

【收录时间】2022-05-21

【文献类型】实证性文章

【主题类别】

区块链治理-市场治理-数字货币