Influences of uncertainty on the returns and liquidity of cryptocurrencies: Evidence from a portfolio approach

Abstract This study examines the influences of different types of uncertainty, namely, World Uncertainty (WUI), Global Economic Policy Uncertainty (GEPU), and Geopolitical Uncertainty (GUI) on the returns and liquidity of 964 cryptocurrencies over the period from April 28, 2013 to July 14, 2018. Besides the full sample, three sub‐portfolios are separated by market capitalization. The principal findings are: (i) increased GEPU has significantly negative effect on the cryptocurrency portfolios' returns; (ii) higher WUI has significantly negative impact on the cryptocurrency portfolios' liquidity, especially for the medium sub‐portfolio; (iii) the effects of uncertainty proxied by GEPU and WUI on cryptocurrency portfolios' returns and liquidity, respectively, are asymmetric; and (iv) GUI is not found to have any significant impact on the returns and liquidity of cryptocurrency portfolios.