The pricing of bad contagion in cryptocurrencies: A four-factor pricing model

Syed Jawad Hussain Shahzad, Elie Bouri, Tanveer Ahmad, Muhammad Abubakr Naeem, Xuan Vinh Vo

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)


We examine as if the incorporation of the contagion risk, which is found significant in cryptocurrencies, can make the resulting four-factor pricing model offers an improved explanatory power. We estimate contagion measure for the large left-tail events in the idiosyncratic disturbances of cryptocurrencies and then incorporate it into the three-factor pricing model. Using data of 1,967 cryptocurrencies from January 1, 2015 to September 26, 2019, we show that the four-factor pricing model outperforms both the cryptocurrency-CAPM and three-factor models. Our findings are useful to researchers of cryptocurrency anomalies and those applying quantitative strategies in the cryptocurrency market.

Original languageEnglish
Article number101797
JournalFinance Research Letters
Publication statusPublished - Jul 2021
Externally publishedYes


  • Asset pricing
  • bad contagion
  • cryptocurrencies
  • factors model

ASJC Scopus subject areas

  • Finance


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