The next QRFE Webinar will take place on the 11 of March 2021 at 15h00.
Our speaker is Dr. Gustavo Schwenkler from Santa Clara University Leavey School of Business. Gustavo's website is here:
Gustavo will present:
Title: Peer Co-Movement in Crypto Markets
Abstract: We show that peer linkages induce significant price co-movement in crypto markets in excess of common risk factors and correlated demand shocks. When large abnormal return shocks hit one crypto, the peers of that crypto experience unusually large abnormal returns of the opposite sign. These effects are primarily concentrated among smaller peers and revert after about four weeks, resulting in predictable returns. We develop trading strategies that exploit the reversal of these peer effects, and show that the strategies are highly profitable even after accounting for trading fees and frictions. All in one, our results highlight peer linkages as a key channel driving the co-movement of cryptocurrencies. We establish our results by identifying crypto peers through co-mentions in online news using novel natural language processing technologies.