Factor Model in Cryptocurrency Market
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Abstract
In our paper, we investigate the explanatory power to the crypto currency return premium of market factor and size factor. We tested both the value-weighted and the equally weighted market factor and a big minus small Fama-French size factor. We found the market and size together can explain 33% of the premium. We also used UMAP to find a non-linear transformation of the crypto returns to create two factors, who can explain over 80% of the premium in both training and testing periods. However, further analysis and research needs to be carried out to decipher what these two factors represent.
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Published
2020-07-10
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This work is licensed under a Creative Commons Attribution 4.0 International License.