Is geopolitical risk priced in the cross-section of cryptocurrency returns?
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SSRN-id4109293_Is_Geopolitical_Risk.pdf (1.06 MB)
Date
2022
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Abstract
We examine the role of geopolitical risk in the cross-sectional pricing of cryptocurrencies. We calculate cryptocurrency exposure to changes in the geopolitical risk index and document that coins with the lowest geopolitical beta outperform those with high geopolitical beta. Our findings suggest that risk-averse investors require additional compensation as motivation to hold cryptocurrencies with low and negative geopolitical betas, and they are willing to pay a premium for assets with high and positive geopolitical betas. The effect cannot be explained by known return predictors and is robust to many considerations.
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Huaigang Long, Ender Demir, Barbara Będowska-Sójka, Adam Zaremba, Syed Jawad Hussain Shahzad, Is geopolitical risk priced in the cross-section of cryptocurrency returns?, Finance Research Letters, Volume 49, 2022, 103131, https://doi.org/10.1016/j.frl.2022.103131.