IDEAS home Printed from https://ideas.repec.org/a/spr/eaiere/v17y2020i2d10.1007_s40844-020-00176-z.html
   My bibliography  Save this article

Exploring the short-term momentum effect in the cryptocurrency market

Author

Listed:
  • Ha Nguyen

    (University of Wollongong)

  • Bin Liu

    (University of Wollongong)

  • Nirav Y. Parikh

    (RMIT University)

Abstract

This study explores the short-term momentum effect in the cryptocurrency market. Utilising a comprehensive cryptocurrency dataset and the portfolio construction methods of Fama and French (J Financ Econ 33:3–56, 1993) and Carhart (J Finance 52:57–82, 1997), we construct cryptocurrency portfolios and examine their performance. The main findings are: (1) the cryptocurrency market portfolio significantly outperforms major stock markets globally in terms of risk-adjusted return; (2) from an asset pricing perspective, short-term momentum effects are significantly priced in the cryptocurrency market, while size effects are controlled, suggesting that the short-term momentum effect explains variations in the returns of cryptocurrency portfolios; and (3) the portfolios constructed according to the short-term momentum effect do not outperform the cryptocurrency market portfolio.

Suggested Citation

  • Ha Nguyen & Bin Liu & Nirav Y. Parikh, 2020. "Exploring the short-term momentum effect in the cryptocurrency market," Evolutionary and Institutional Economics Review, Springer, vol. 17(2), pages 425-443, July.
    • Handle: RePEc:spr:eaiere:v:17:y:2020:i:2:d:10.1007_s40844-020-00176-z
    DOI: 10.1007/s40844-020-00176-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40844-020-00176-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40844-020-00176-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Michael C. Jensen, 1968. "The Performance Of Mutual Funds In The Period 1945–1964," Journal of Finance, American Finance Association, vol. 23(2), pages 389-416, May.
    3. Ledoit, Oliver & Wolf, Michael, 2008. "Robust performance hypothesis testing with the Sharpe ratio," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 850-859, December.
    4. William Schwert, G., 2002. "Stock volatility in the new millennium: how wacky is Nasdaq?," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 3-26, January.
    5. Grobys, Klaus & Sapkota, Niranjan, 2019. "Cryptocurrencies and momentum," Economics Letters, Elsevier, vol. 180(C), pages 6-10.
    6. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    7. Wei Zhang & Pengfei Wang & Xiao Li & Dehua Shen, 2018. "Some stylized facts of the cryptocurrency market," Applied Economics, Taylor & Francis Journals, vol. 50(55), pages 5950-5965, November.
    8. Baker, Malcolm & Litov, Lubomir & Wachter, Jessica A. & Wurgler, Jeffrey, 2010. "Can Mutual Fund Managers Pick Stocks? Evidence from Their Trades Prior to Earnings Announcements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(5), pages 1111-1131, October.
    9. Pozo, Susan, 1992. "Conditional Exchange-Rate Volatility and the Volume of International Trade: Evidence from the Early 1900s," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 325-329, May.
    10. Nicolas P. B. Bollen, 2005. "Short-Term Persistence in Mutual Fund Performance," The Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 569-597.
    11. Fama, Eugene F. & French, Kenneth R., 2012. "Size, value, and momentum in international stock returns," Journal of Financial Economics, Elsevier, vol. 105(3), pages 457-472.
    12. Andros Gregoriou, 2019. "Cryptocurrencies and asset pricing," Applied Economics Letters, Taylor & Francis Journals, vol. 26(12), pages 995-998, July.
    13. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    14. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    15. Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
    16. Cheng, Qing & Liu, Xinyuan & Zhu, Xiaowu, 2019. "Cryptocurrency momentum effect: DFA and MF-DFA analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    17. Vikas Agarwal & Wei Jiang & Yuehua Tang & Baozhong Yang, 2013. "Uncovering Hedge Fund Skill from the Portfolio Holdings They Hide," Journal of Finance, American Finance Association, vol. 68(2), pages 739-783, April.
    18. Katsiampa, Paraskevi, 2017. "Volatility estimation for Bitcoin: A comparison of GARCH models," Economics Letters, Elsevier, vol. 158(C), pages 3-6.
    19. Berk, Jonathan B. & van Binsbergen, Jules H., 2015. "Measuring skill in the mutual fund industry," Journal of Financial Economics, Elsevier, vol. 118(1), pages 1-20.
    20. Aalborg, Halvor Aarhus & Molnár, Peter & de Vries, Jon Erik, 2019. "What can explain the price, volatility and trading volume of Bitcoin?," Finance Research Letters, Elsevier, vol. 29(C), pages 255-265.
    21. Urquhart, Andrew, 2016. "The inefficiency of Bitcoin," Economics Letters, Elsevier, vol. 148(C), pages 80-82.
    22. Parker, Rh, 1968. "Discounted Cash Flow In Historical Perspective," Journal of Accounting Research, Wiley Blackwell, vol. 6(1), pages 58-71.
    23. Pástor, Ľuboš & Stambaugh, Robert F. & Taylor, Lucian A., 2015. "Scale and skill in active management," Journal of Financial Economics, Elsevier, vol. 116(1), pages 23-45.
    24. De Bondt, Werner F M & Thaler, Richard, 1985. "Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
    25. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    26. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    27. Hanley, Kathleen Weiss & Kumar, A. Arun & Seguin, Paul J., 1993. "Price stabilization in the market for new issues," Journal of Financial Economics, Elsevier, vol. 34(2), pages 177-197, October.
    28. Hendricks, Darryll & Patel, Jayendu & Zeckhauser, Richard, 1993. "Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988," Journal of Finance, American Finance Association, vol. 48(1), pages 93-130, March.
    29. Hearn, Bruce, 2011. "Size and liquidity effects in Japanese regional stock markets," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 157-181, June.
    30. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    31. Borri, Nicola, 2019. "Conditional tail-risk in cryptocurrency markets," Journal of Empirical Finance, Elsevier, vol. 50(C), pages 1-19.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmed, Walid M.A., 2022. "Robust drivers of Bitcoin price movements: An extreme bounds analysis," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    2. Suardi, Sandy & Rasel, Atiqur Rahman & Liu, Bin, 2022. "On the predictive power of tweet sentiments and attention on bitcoin," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 289-301.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fernando Rubio, 2005. "Eficiencia De Mercado, Administracion De Carteras De Fondos Y Behavioural Finance," Finance 0503028, University Library of Munich, Germany, revised 23 Jul 2005.
    2. Liebi, Luca J., 2022. "Is there a value premium in cryptoasset markets?," Economic Modelling, Elsevier, vol. 109(C).
    3. Sebastian Lobe & Christian Walkshäusl, 2016. "Vice versus virtue investing around the world," Review of Managerial Science, Springer, vol. 10(2), pages 303-344, March.
    4. A. Balakrishnan, 2016. "Size, Value, and Momentum Effects in Stock Returns: Evidence from India," Vision, , vol. 20(1), pages 1-8, March.
    5. Güler ARAS & İlhan ÇAM & Bilal ZAVALSIZ & Serkan KESKİN, 2018. "Fama-French Çok Faktör Varlık Fiyatlama Modellerinin Performanslarının Karşılaştırılması: Borsa İstanbul Üzerine Bir Uygulama," Istanbul Business Research, Istanbul University Business School, vol. 47(2), pages 183-207, November.
    6. Şahin, Baki Cem & Danışoğlu, Seza, 2022. "Ambiguity and asset pricing: An empirical investigation for an emerging market," International Review of Financial Analysis, Elsevier, vol. 84(C).
    7. Israel, Ronen & Moskowitz, Tobias J., 2013. "The role of shorting, firm size, and time on market anomalies," Journal of Financial Economics, Elsevier, vol. 108(2), pages 275-301.
    8. Paul Handro & Bogdan Dima, 2024. "Analyzing Financial Markets Efficiency: Insights from a Bibliometric and Content Review," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 119-175, May.
    9. Fracasso, Laís Martins & Müller, Fernanda Maria & Ramos, Henrique Pinto & Righi, Marcelo Brutti, 2023. "Is there a risk premium? Evidence from thirteen measures," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 182-199.
    10. Alex R. Horenstein, 2021. "The Unintended Impact of Academic Research on Asset Returns: The Capital Asset Pricing Model Alpha," Management Science, INFORMS, vol. 67(6), pages 3655-3673, June.
    11. Amit Goyal, 2012. "Empirical cross-sectional asset pricing: a survey," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 26(1), pages 3-38, March.
    12. Rocciolo, Francesco & Gheno, Andrea & Brooks, Chris, 2022. "Explaining abnormal returns in stock markets: An alpha-neutral version of the CAPM," International Review of Financial Analysis, Elsevier, vol. 82(C).
    13. John Y. Campbell, 2000. "Asset Pricing at the Millennium," Journal of Finance, American Finance Association, vol. 55(4), pages 1515-1567, August.
    14. Committee, Nobel Prize, 2013. "Understanding Asset Prices," Nobel Prize in Economics documents 2013-1, Nobel Prize Committee.
    15. Clemens Sialm & Hanjiang Zhang, 2020. "Tax‐Efficient Asset Management: Evidence from Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 75(2), pages 735-777, April.
    16. Walkshäusl, Christian & Lobe, Sebastian, 2010. "Fundamental indexing around the world," Review of Financial Economics, Elsevier, vol. 19(3), pages 117-127, August.
    17. Joop Huij & Marno Verbeek, 2009. "On the Use of Multifactor Models to Evaluate Mutual Fund Performance," Financial Management, Financial Management Association International, vol. 38(1), pages 75-102, March.
    18. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, July.
    19. Oehler, Andreas & Horn, Matthias & Wendt, Stefan, 2016. "Benefits from social trading? Empirical evidence for certificates on wikifolios," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 202-210.
    20. repec:fau:fauart:v:65:y:2015:i:1:p:84-104 is not listed on IDEAS
    21. Urs von Arx & Andreas Ziegler, 2008. "The Effect of CSR on Stock Performance: New Evidence for the USA and Europe," CER-ETH Economics working paper series 08/85, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    Keywords

    Cryptocurrency; Bitcoin; Momentum; Asset pricing; Portfolio performance; Portfolio management; JEL classification: G11; G12;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eaiere:v:17:y:2020:i:2:d:10.1007_s40844-020-00176-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.