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

Research output: Contribution to journalArticle

Authors

External departments

  • University of Dubai
  • Poznan University of Economics and Business
  • University of Pretoria

Details

Original languageEnglish
JournalApplied Economics Letters
Early online date3 Dec 2019
DOIs
Publication statusE-pub ahead of print - 3 Dec 2019
Publication type

Research output: Contribution to journalArticle

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.