Stop-loss rules and momentum payoffs in cryptocurrencies

【Author】 Sadaqat, Mohsin; Butt, Hilal Anwar

【Source】JOURNAL OF BEHAVIORAL AND EXPERIMENTAL FINANCE

【影响因子】8.222

【Abstract】Keeping in view the extreme volatility of cryptocurrencies, this study analyzes the efficacy of stop-loss rules for the momentum strategy across 147 cryptocurrencies for the period of January 2015 to June 2022. We find that the stop-loss momentum strategy provides exceedingly higher returns, the Sharpe ratio, and alphas in comparison to other benchmark momentum strategies. In the context of prospect theory, the stop-loss rules work as self-control for investors to realize losses, thereby controlling the disposition effect and as a result, investors can earn significantly higher payoffs. Furthermore, our results provide evidence that the stop-loss momentum strategy outperforms other momentum strategies in all market states. Finally, the robustness analyses reaffirm the importance of implementing the stop-loss rules in managing the downside risk of cryptocurrencies.& COPY; 2023 Elsevier B.V. All rights reserved.

【Keywords】Cryptocurrencies; Momentum; Stop-loss strategy; Loss aversion; Disposition bias

【发表时间】2023 SEP

【收录时间】2023-10-05

【文献类型】实验仿真

【主题类别】

区块链治理-市场治理-价格预测