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The Bitcoin Premium: A Persistent Puzzle

Author

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  • Wilson Matthew S.

    (Robins School of Business, University of Richmond, Richmond, USA)

Abstract

On average, stocks have a much higher rate of return than bonds; this has led to research on the equity premium puzzle. Similarly, Bitcoin outperforms stocks; I call this the Bitcoin premium puzzle. I show that standard macroeconomic models predict a low or negative Bitcoin premium. Though Bitcoin is extremely volatile, the model is rejected even when the coefficient of relative risk aversion is above 10. The Bitcoin premium declined after a structural break in late 2013. However, the puzzle is persistent; there has been no downward trend in the premium since.

Suggested Citation

  • Wilson Matthew S., 2024. "The Bitcoin Premium: A Persistent Puzzle," The B.E. Journal of Macroeconomics, De Gruyter, vol. 24(1), pages 135-148, January.
    • Handle: RePEc:bpj:bejmac:v:24:y:2024:i:1:p:135-148:n:12
    DOI: 10.1515/bejm-2023-0107
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    More about this item

    Keywords

    Bitcoin; stocks; asset-pricing puzzles;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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