Publication detail

On Empirical Challenges in Forecasting Market Betas in Crypto Markets

Author(s): prof. PhDr. Ladislav Krištoufek Ph.D., Michael Mark
Mgr. Jan Šíla MSc., Michael Mark
Type: IES Working Papers
Year: 2022
Number: 19
ISSN / ISBN:
Published in: IES Working Papers 19/2022
Publishing place: Prague
Keywords: Asset pricing, CAPM, Market Beta, Cryptocurrency
JEL codes: C21,C53,C58,G12
Suggested Citation: Šíla J., Mark M. and Krištoufek L. (2022): "On Empirical Challenges in Forecasting Market Betas in Crypto Markets" IES Working Papers 19/2022. IES FSV. Charles University.
Abstract: This paper investigates the predictability of market betas for crypto assets. The market beta is the optimal weight of a short position in a simple two-asset portfolio hedging the market risk. Investors are therefore keen to forecast the market beta accurately. Estimating the market beta is a fundamental financial problem and we document pervasive empirical issues that arise in the emerging market of crypto assets. Although recent empirical results about US stocks suggest predictability of the future realized betas about 55%, predictability for the universe of crypto assets is at most 20%. Our results suggest that the crypto market betas are highly sensitive not only to the beta estimation method but also to the selection of the market index. Thus we also contribute to the discussion on the appropriate market representation.
Downloadable: wp_2022_19_sila, mark, kristoufek

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