Exploring the short-term momentum effect in the cryptocurrency market

Authors

Thi Thanh Ha Nguyen, University of WollongongFollow
Bin Liu, University of WollongongFollow
Nirav Y. Parikh

RIS ID

144704

Publication Details

Nguyen, H., Liu, B. & Parikh, N. Y. (2020). Exploring the short-term momentum effect in the cryptocurrency market. Evolutionary and Institutional Economics Review,

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.