Cryptocurrencies and asset pricing

ABSTRACT

We demonstrate that investors obtain abnormal returns by trading cryptocurrencies daily on the London Stock Exchange from 2014–2017. Excess returns persist once we account for systematic risk, size, value, momentum, profitability and investment. Investor abnormal returns in cryptocurrencies implies inefficiency.

KEYWORDS:

• Cryptocurrencies
• Capital Asset Pricing Model
• London Stock Exchange
• efficiency

JEL CLASSIFICATION:

• G12
• G15

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ For a complete review of the cryptocurrency literature, see Bonneau et al. (2015) for coverage of technical issues of Bitcoin and Böhme et al. (2015) for a discussion of the design of Bitcoin.

² We would like to thank an anonymous referee for suggesting this point.