Disagreement and the Cross Section of Cryptocurrency Returns

We present the first evidence of investor-trading-based disagreement’s influence on cross-sectionalcryptocurrency daily returns. Cryptocurrencies with higher standardized abnormal turnover (higherinvestor disagreement) experience significantly lower future returns that cannot be explained bycommon risk factors, nor by various coin characteristics. Diminution of short-sale constraintsmitigates the underperformance of high disagreement cryptocurrencies. Supporting our proxy, highdisagreement coins in the presence of short sale constraints, show more positive contemporaneousorder imbalances. Robustness tests show the lower expected returns of high disagreement coins are driven by decreases in both buying and selling activities, with the former exceeding the latter inmagnitude.