One shape fits all? A comprehensive examination of cryptocurrency return distributions

Jan Jakub Szczygielski*, Andreas Karathanasopoulos, Adam Zaremba

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

We perform the most comprehensive test of cryptocurrency return distributions to date. We fit 58 hypothetical distributions to 15 major cryptocurrencies to establish which of these best describes cryptocurrency returns. The answer is: ‘It depends.’ A sharp-peaked Cauchy distribution is the most likely distribution for the majority of return series. Specific distributions are definitively identified for only a handful of cryptocurrencies. The best fitting distributions are peaked and thick-tailed, with some possessing variable shape parameters. Our findings have implications for financial modelling and its applications, such as risk measurement and risk management.

Original languageEnglish
Pages (from-to)1567-1573
JournalApplied Economics Letters
Volume27
Issue number19
Early online date3 Dec 2019
DOIs
Publication statusPublished - 10 Nov 2020

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