Publication detail

Fil, M. & Kristoufek, L.: Pairs Trading in Cryptocurrency Markets

Author(s): prof. PhDr. Ladislav Krištoufek Ph.D., Fíl, Miroslav
Type: Articles in journals with impact factor
Year: 2020
Number: 0
Published in: IEEE Access 8, pp. 172644-172651 PDF
Publishing place:
Keywords: cryptocurrencies, intra-day trading, pairs trading
JEL codes:
Suggested Citation:
Grants: PRIMUS/19/HUM/17 2019-2021 Behavioral finance and macroeconomics: New insights for the mainstream
Abstract: Pairs trading is a strategy based on exploiting mean reversion in prices of securities. Even though these strategies have been shown to perform well in equities, their performance is unknown for the field of cryptocurrencies, usually perceived as inefficient and predictable. We apply the distance and cointegration methods to the basket of 26 liquid cryptocurrencies traded on Binance, specifically at 5-minute, 1-hour and daily frequencies. In our backtests, the strategies underperform classical benchmarks. However, the results are quite sensitive to parameter settings and external factors such as transaction costs or execution windows. In addition, higher-frequency trading delivers better performance.


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