Cryptocurrencies’ Internal and External Relations: a Descriptive Analysis of Cryptocurrency Dynamics and Relations to the US Equity Market
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School of Business |
Bachelor's thesis
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Authors
Date
2017
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
34
Series
Abstract
This thesis is a descriptive statistical analysis of cryptocurrency market and its relation within cryptocurrencies and across asset classes, using correlation functions, orthogonalized impulse response functions and OLS regressions. Consistent with Wang (2014), bitcoin does not suffer from a liquidity trap, even though bitcoin is a decentralized system. This thesis concludes that bitcoin has a lead effect on only 2 out of 8 of the top cryptocurrencies, endowing diversification benefits within cryptocurrency market. This paper provides evidence on cryptocurrency market’s and US equity market’s impulse response dynamics which are insignificant, consistent with Gangwal’s (2016) results that adding cryptocurrencies to a diversified portfolio will yield to a higher Sharpe ratio. Lastly, the study reports bitcoin momentum factor having an impact on banking and financial industries’ excess returns.Description
Thesis advisor
Shin, SeanKeywords
Bitcoin, Bitcoin liquidity, Bitcoin and equity market, cryptocurrency, descriptive analysis, asset class, market relations