Essays on Asset Management and Crypto Asset Pricing

Ainsley To, PhD
Delegation Gap, Disposition Effect, Cryptocurrency Returns, Cryptocurrency, Cashflow

Abstract :

The Delegation Gap: The Disposition Effect and Other People's Money: Using a unique dataset, this paper documents a "delegation gap" in investor trades - the disposition effect is reduced when investment decisions are fully delegated to an investment manager compared to when decisions are made by the account owner. The delegation gap is present in both retail and professional accounts, as well as when comparing trades made by investment managers on behalf of clients to those they made in their own personal accounts. The delegation gap varies across investor demographic groups and is positively related to economic news sentiment, suggesting a larger benefit to delegation during periods of negative sentiment. The evidence is consistent with the view that under certain conditions, delegating investment decisions can reduce behavioural mistakes made by investors trading emotionally with their own money.

Magical Internet Money? On-chain Cashflows and the Cross-section of Cryptocurrency Returns: I find that crypto valuation measures derived from on-chain fundamental cashflow characteristics, analogous to valuation metrics used in equity markets, are priced in the cross-section of token returns. A cashflow-based value factor constructed from these measures is not spanned by crypto factor models in the literature. I test different measures of cashflow and find that revenues retained by protocols show the strongest results, whilst token incentives as a cost of revenue measure have little pricing power. I also find evidence that different characteristics are significant for native tokens of a blockchain compared to tokens issued by decentralised applications. Lastly, I test a set of novel crypto native characteristics, unique to public blockchains, that proxy for capital gains overhang, insider ownership, and investor sophistication.


Publication date of the thesis

Thesis committee

Supervisor:  Laurent Calvet, formerly EDHEC Business School 

External reviewer: Wei Xiong, Princeton University 

Other committee members: Emmanuel Jurczenko, Enrique Schroth and Raman Uppal, EDHEC Business School