Proceedings of the 7th International Conference on Business, Management and Finance
Year: 2024
DOI:
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Investor Sentiment and Risk-adjusted Return Justification of Cryptocurrencies
Shaurya Jeet Singh, Prof. Prakash Singh
ABSTRACT:
This study investigates the risk-adjusted returns of cryptocurrencies by employing a 365-day Moving Sharpe ratio, examining both cross-sectional and time series aspects. It further compares the profile of cryptocurrencies with that of US-based equity stocks and tries to find significant similarities and dissimilarities between the two. Cryptocurrencies show more variation in time series but less variation in the cross-section, whereas equity stocks show the exact opposite behavior. Normal distribution-based comparisons show both similarities as well as dissimilarities between the two asset classes, but dissimilarities are not very significant. It is further shown in the paper that deviation from the Normal behavior is something very frequently observed in both the time series and even the nature of deviation is almost identical in both the asset classes. Such level of similarities depicts that although Cryptocurrencies are a new asset class, and are perceived as fundamentally different from traditional asset classes, however, from an investor perspective the same caveats and warnings hold in both cases. Traditional portfolio management tools and techniques may be very applicable in both cases.
keywords: Time Series, Cryptocurrency, US equity, Investor sentiments