Journal
FINANCE RESEARCH LETTERS
Volume 57, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2023.104196
Keywords
Cryptocurrencies; Momentum; VIX; Economic policy uncertainty
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This paper investigates the predictability of changes in cryptocurrency momentum premiums by VIX, VIX premium, and economic policy uncertainty (EPU). The empirical analysis shows that higher VIX premiums can increase the one-month-ahead momentum premium, while VIX and EPU levels are not predictors of momentum premiums. Overall, it is demonstrated that uncertainty can affect the cryptocurrency momentum premium through VIX futures rather than VIX itself or news-based information (i.e., EPU).
The cryptocurrency momentum premium, defined as the risk premium exposure to the cryptocurrencies with higher past return, is a key factor in the cryptocurrency market. In this paper, we investigate whether VIX, VIX premium (Cheng, 2019), or economic policy uncertainty (EPU) can predict changes in cryptocurrency momentum premiums. The empirical analysis indicates that higher VIX premiums can increase the one-month-ahead momentum premium, and that VIX and EPU levels are not predictors of momentum premiums. Overall, we demonstrate that uncertainty can affect the cryptocurrency momentum premium through VIX futures rather than VIX itself or news-based information (i.e., EPU).
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