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A0838
Title: Common dynamic factors for cryptocurrencies and multiple pair-trading statistical arbitrages Authors:  Marco Patacca - University of Verona (Italy) [presenting]
Gianna Figa Talamanca - University of Perugia (Italy)
Abstract: Dynamic factor analysis is applied to model the joint behaviour of Bitcoin, Ethereum, Litecoin and Monero, as a representative basket of the cryptocurrencies asset class. The empirical results suggest that a model with two dynamic factors suitably describes the basket price. More precisely, we detect one integrated and one stationary factor until the end of August 2019 and two integrated factors afterwards. Based on this evidence, we define a multiple long-short trading strategy which proves profitable when the second factor is stationary.