Downside risk and the cross-section of cryptocurrency returns

【Author】 Zhang, Wei; Li, Yi; Xiong, Xiong; Wang, Pengfei

【Source】JOURNAL OF BANKING & FINANCE

【影响因子】3.539

【Abstract】This paper investigates whether investors can earn higher profits by holding cryptocurrencies with higher downside risk. Both portfolio-level analyses and cryptocurrency-level cross-sectional regressions suggest a positive cross-sectional relation between downside risk and future returns in the cryptocurrency market. In addition to the risk-return tradeoff theory, the limits-to-arbitrage theory also has some explanatory power for these results. Moreover, we examine the source of downside risk premium, the existence of upside risk premium, as well as the intertemporal relation between downside risk and future returns. Collectively, our findings highlight the important role of downside risk in determining cryptocurrency prices. (c) 2021 Elsevier B.V. All rights reserved.

【Keywords】Cryptocurrency; Downside risk; Return predictability

【发表时间】2021 DEC

【收录时间】2022-01-01

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