Professor Andrew Urquhart is Professor of Finance and Financial Technology and Head of the Department of Finance at Birmingham Business School (BBS).

This is the third installment of the Professor Coin column, in which I bring important insights from published academic literature on cryptocurrency to the Decrypt readership. This week we’ll delve into how to price cryptocurrencies.

In any market, one of the most important questions is ‘what drives the expected returns of the assets?” This age-old question has been studied thousands of times by academics, investment banks, traders and hedge funds in equity markets.

One of the most popular findings that helped Eugene Fama earn the Nobel Prize for Economics in 2013 is the Fama-French factors, which show that the market excess return, the outperformance of small versus big companies, and the outperformance of high book-to-market versus low book-to-market firms help explain stock returns.

They have extended this to a Fama-French five-factor model which i

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Author: Andrew Urquhart