An empirical study of market risk factors for Bitcoin

TL;DR

This paper investigates whether traditional equity risk factors, specifically Fama-French factors, can explain Bitcoin's risk and return characteristics, providing insights into systemic risk modeling for cryptocurrencies.

Contribution

It is the first empirical analysis to test the explanatory power of Fama-French equity factors on Bitcoin's excess returns.

Findings

Fama-French factors significantly explain Bitcoin's excess returns.

Equity market factors contribute to understanding Bitcoin's systemic risk.

The study demonstrates the relevance of traditional financial models for cryptocurrencies.

Abstract

The study examines whether fama-french equity factors can effectively explain the idiosyncratic risk and return characteristics of Bitcoin. By incorporating Fama-french factors, the explanatory power of these factors on Bitcoin's excess returns over various moving average periods is tested through applications of several statistical methods. The analysis aims to determine if equity market factors are significant in explaining and modeling systemic risk in Bitcoin.