TY - JOUR
T1 - Momentum trading in cryptocurrencies
T2 - short-term returns and diversification benefits
AU - Tzouvanas, Panagiotis
AU - Kizys, Renatas
AU - Tsend-Ayush, Bayasgalan
N1 - Funding Information:
We would like to thank the two anonymous referees, Professor Carol Alexander as well as the participants of the second Cryptocurrency Research Conference 2019 at the University of Southampton, for their valuable comments and suggestions, which have helped us improve this manuscript significantly. We would like to gratefully acknowledge the support of the University of Portsmouth, where this research was developed.
Publisher Copyright:
© 2019 Elsevier B.V.
PY - 2020/5/11
Y1 - 2020/5/11
N2 - 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.
AB - 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.
KW - cryptocurrency
KW - dynamic conditional correlation
KW - momentum
UR - http://www.scopus.com/inward/record.url?scp=85072809234&partnerID=8YFLogxK
U2 - 10.1016/j.econlet.2019.108728
DO - 10.1016/j.econlet.2019.108728
M3 - Article
AN - SCOPUS:85072809234
SN - 0165-1765
VL - 191
JO - Economics Letters
JF - Economics Letters
M1 - 108728
ER -