Identification of Risk Factors for Predicting Cryptocurrency Returns

Abstract

In this research we consider a comprehensive list of price- and market-related return predictors in the cryptocurrency market. Using the long-short strategies we formed a set of available characteristics at the daily and weekly frequencies. We further implement equal- and value-weighted portfolios and find a number of cryptocurrency characteristics that are successfully predicting their returns. Specifically, a number of cryptocurrency characteristics form successful long-short strategies that generate sizable and statistically significant returns.