Cryptocurrencies: formation of returns from the CRIX index

ABSTRACT

This paper examines the formation prices in the cryptocurrency market using the CAPM model based on OLS and Regime-Switching approaches. Following Baek & Elbeck’s argument that internal factors drove cryptocurrency returns, CAPM was built, taking the CRIX index as the market and ten cryptocurrencies as assets. The results suggest that the market risk factor can partially explain cryptocurrency returns. Moreover, the regime change estimation positively impacts the market risk determination power for cryptocurrencies.

KEYWORDS:

• CAPM
• Criptocurrencies
• Markov Switching
• bitcoin

JEL CLASSIFICATION:

• G10
• G12

Acknowledgments

João Frois Caldeira gratefully acknowledges support provided by CNPq under grants 430192/2016-9 and 306886/2018-9.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Source: https://coinmarketcap.com/

Preprint submitted to Applied Economics Letters 11 May 2020.

² https://coinmarketcap.com/coins/