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)

Abstract

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
Volume41
DOIs
Publication statusPublished - Jul 2021
Externally publishedYes

Keywords

  • Asset pricing
  • bad contagion
  • cryptocurrencies
  • factors model

ASJC Scopus subject areas

  • Finance

Fingerprint

Dive into the research topics of 'The pricing of bad contagion in cryptocurrencies: A four-factor pricing model'. Together they form a unique fingerprint.

Cite this