Momentum and liquidity in cryptocurrencies
General Finance
2019-04-02 v1
Abstract
The goal of this paper is to explore the relationship between momentum effects and liquidity in cryptocurrency markets. Portfolios based on momentum-liquidity bivariate sorts are formed and rebalanced on a varying number of cryptocurrencies through time. We find a strong momentum effect in the most liquid cryptocurrencies, which supports the theories of investor herding behavior. Moreover, we propose two profitable long-only strategies: the illiquid losers and liquid winners, which exhibit improved risk adjusted performance over the market capitalization weighted portfolio.
Keywords
Cite
@article{arxiv.1904.00890,
title = {Momentum and liquidity in cryptocurrencies},
author = {Stjepan Begušić and Zvonko Kostanjčar},
journal= {arXiv preprint arXiv:1904.00890},
year = {2019}
}