Momentum trading in cryptocurrencies: short-term returns and diversification benefits

Tzouvanas, Panagiotis, Kizys, Renatas and Tsend-Ayush, Bayasgalan (2019) Momentum trading in cryptocurrencies: short-term returns and diversification benefits. Economics Letters. ISSN 0165-1765

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Abstract

We test for the presence of momentum effects in cryptocurrency market and estimate dynamic conditional correlations (DCCs) of returns between momentum portfolios of cryptocurrencies and traditional assets. First, investment portfolios are constructed adherent to the classic J/K momentum strategy, using daily data from twelve cryptocurrencies for over a period of three years. We identify the existence of momentum effect, which is highly significant for short-term portfolios but disappears over the longer term. Second, we show that cross correlations of weekly returns between momentum portfolio of cryptocurrencies and traditional assets are unlike correlations of returns between traditional assets. Third, we find that momentum portfolios of cryptocurrencies not only offer diversification benefits but also can be a hedge and safe haven for traditional assets.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Accounting and Finance
Research Centres and Groups: Business and Finance Research Group
Depositing User: Panagiotis Tzouvanas
Date Deposited: 07 Oct 2019 11:10
Last Modified: 04 Nov 2019 10:51
URI: http://sro.sussex.ac.uk/id/eprint/86820

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