Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2021
Abstract
Using the minute-frequency data on Binance, we find strong evidence of cross-cryptocurrency return predictability. The lagged returns of other cryptocurrencies serve as significant predictors of focal cryptocurrencies up to ten minutes, in line with slow information diffusion. The results are robust across various methods, including the adaptive LASSO and principal component analysis. Furthermore, a long-short portfolio formed on the past returns of cryptocurrencies can generate a daily return of 2.16% out-of-sample after accounting for transaction costs, indicating sizable economic value of cross-cryptocurrency return predictability.
Keywords
Cryptocurrency, return predictability, information spillover, adaptive LASSO
Discipline
Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
65
Identifier
10.2139/ssrn.3974583
Publisher
SSRN
Citation
GUO, Li; SANG, Bo; Jun TU; and WANG, Yu.
Cross-cryptocurrency return predictability. (2021). 1-65.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6901
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.3974583