Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Ricardo Fernholz

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2018 Jae Sung Choi


This paper shows the existence of the size effect in the cryptocurrency market. The size effect is a market phenomenon observed in the stock market in which smaller assets outperform larger assets. Recent literature has revealed the size effect in other financial markets as well. In order to explain the size effect, this paper proposes a general quantitative theory that supports its existence in any financial markets under specific conditions. Furthermore, the paper tests for the size effect in the cryptocurrency market using daily price data from April 2013 to April 2018. The paper finds a statistically significant size effect across the cryptocurrency market during the sample period. In the process, we test a profitable pair-trading strategy that involves opening a short position on the higher rank (larger assets) and opening a long position on the lower rank (smaller assets) of the cryptocurrency market. Based on our findings, we discuss the implications on modern finance, specifically on the subjects of Efficient Market Hypothesis and asset pricing models.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.