Returns to Buying Winners and Selling Losers: A Look at Cryptocurrencies

• Main Author: Walker, Daniel
• Format: Others
• Published: Scholarship @ Claremont 2018
• Subjects: Finance; momentum; cryptocurrency; market; trading; robert day; Finance and Financial Management; Other Economics
• Online Access: http://scholarship.claremont.edu/cmc_theses/1842; http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=3039&context=cmc_theses

This paper is, to my knowledge, one of the first ever to examine the effectiveness of price momentum trading strategies applied to cryptocurrencies. Using aggregate OHLCV (Open, High, Low, Close, Volume) data on cryptocurrency pairs from Poloniex, Bittrex, and Bitfinex, I apply Jegadeesh and Titman’s classic -month/-month momentum trading strategy, reporting annual returns with and without incorporating trading fees. Portfolios are resampled daily, weekly, and monthly, testing lookback and holding periods ranging from one day to one year. The results show that trading cryptocurrencies using momentum strategies derives returns that rapidly increase the more often portfolios are resampled, with the exception of weekly portfolios. However, after incorporating trading fees, returns between high and low frequency portfolios become more comparable, though daily strategies still bring the highest fee-adjusted returns at about 10% annually. This paper adds to the very limited research on momentum factors within the cryptocurrency market.