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

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posted on 2023-06-09, 19:15 authored by Panagiotis Tzouvanas, Renatas Kizys, Bayasgalan Tsend-Ayush
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.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Economics Letters

ISSN

0165-1765

Publisher

Elsevier

Department affiliated with

  • Accounting and Finance Publications

Research groups affiliated with

  • Business and Finance Research Group Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2019-10-07

First Open Access (FOA) Date

2021-03-30

First Compliant Deposit (FCD) Date

2019-10-08

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