Financial Review· 2026Q2
Volatility ≠ Risk: When Timing Alpha in Crypto Markets Reflects Mispricing
- 0citations
- Q2SCImago
- 2026year
Short summary
Realized volatility in crypto markets predicts alpha, but only under loose monetary policy and high uncertainty, indicating it reflects noise-driven speculation rather than risk compensation.
AI-generated from the title and abstract; the full text is not read.
Key points
- Volatility timing in crypto markets generates alpha, but is conditional on loose monetary policy and high uncertainty.
- Realized volatility in crypto markets reflects noise-driven speculative flows, not risk compensation.
- Small-cap coins are dual vehicles for speculation and crisis hedging, amplifying the volatility-mispricing effect.
- Crypto markets offer a pure setting to isolate flow-based return predictability due to the absence of a fundamental anchor.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT Volatility timing in cryptocurrency markets generates significant alpha, but only during periods of loose monetary policy and high uncertainty. Analyzing S&P crypto indices (2017–2023) dominated by large‐cap assets, we show realized volatility can reflect noise‐driven speculative flows, not risk compensation. This effect is strongest for small‐cap coins, which serve as dual vehicles for speculation and crisis hedging, unlike penny stocks. In a market with no fundamental anchor, crypto provides a pure setting to isolate flow‐based return predictability. Our findings repurpose volatility from a risk measure into a signal of time‐varying inefficiency, suggesting how dynamic strategies may exploit conditional anomalies.
The authors' abstract, as published at the source. Financial Review, 2026 · DOI ↗
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Field: Information Systems
Information SystemsComputer Science