What are the key factors to consider when calculating CAPM alpha for cryptocurrencies?

1 answers

• Shubhodeep MondalOct 19, 2024 · a year ago
  When it comes to calculating CAPM alpha for cryptocurrencies, there are a few key factors that need to be taken into account. First and foremost, the risk-free rate plays a crucial role. This rate represents the return on a risk-free investment, such as a government bond. Secondly, the market risk premium is an important factor. It reflects the additional return that investors expect to earn for taking on market risk. Thirdly, the beta of the cryptocurrency is significant. It measures the sensitivity of the cryptocurrency's returns to the overall market returns. Lastly, the expected return of the market is a factor to consider. By considering these factors, one can calculate the CAPM alpha for cryptocurrencies and gain insights into their performance.
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