Victoria Dobrynskaya

Publications in refereed journals

Downside Market Risk of Carry Trades, Review of Finance 18(5), pp. 1885-1913, 2014.

Abstract. I propose a new factor – the global downside market factor – to explain high returns to carry trades. I show that carry trades have high downside market risk, i.e. they crash systematically in the worst states of the world when the global stock market plunges or when a disaster occurs. The downside market factor explains the returns to currency portfolios sorted by the forward discount better than other factors previously proposed in the literature. GMM estimates of the downside beta premium are similar in the currency and stock markets, statistically significant and close to their theoretical value. High returns to carry trades are fair compensation for their high downside market risk.

Winner of EFMA 2013 John Doukas Best Paper Award

Review of Finance Virtual Special Issue, February 2019


Currency Exposure to Downside Risk: Which Fundamentals Matter? Review of International Economics 23(2), pp. 245-360, 2015.

Abstract. I study whether or not countries’ macroeconomic characteristics are systematically related to their currencies’ exposure to the downside market risk. I find that the currency downside risk is strongly associated with the local inflation rate, real interest rate and net foreign asset position. Currencies of countries with high inflation and real interest rates and negative net foreign asset position (debtor countries) are more exposed to the downside risk whereas currencies of countries with low inflation and real interest rates and positive net foreign asset position (creditor countries) exhibit ‘safe haven’ properties. The local real interest rate has the highest explanatory power in accounting for the cross-section of currency exposure to the downside risk. This suggests that the high currency exposure to the downside risk is a consequence of investments in high-yield risky countries and flight from them in ‘hard times’.  


Pricing Within and Across Asset Classes, Finance Research Letters 25, pp. 10-15, 2018.

Abstract. When an asset-pricing model is claimed to explain a cross-section of portfolio returns, it should do so both within one asset class and across different asset classes. This paper illustrates that this is not always the case using the CAPM and Asness, Moskowitz and Pedensen (2013) models applied to momentum and value portfolios as examples. Apparently, on one hand, the CAPM is almost as good as the AMP model in explaining the portfolio returns across asset classes, but on the other hand, the AMP model is almost as bad as the CAPM in explaining these returns within one asset class. Therefore, applying an asset-pricing model to a single cross-section of returns may generate misleading results.


Avoiding Momentum Crashes: Dynamic Momentum and Contrarian Trading, Journal of International Financial Markets, Institutions and Money 63, 2019.

Abstract. High momentum returns cannot be explained by risk factors, but they are negatively skewed and subject to occasional severe crashes. I explore the timing of momentum crashes and show that momentum strategies tend to crash in 1-3 months after the local stock market plunge. Next, I propose a simple dynamic trading strategy which coincides with the standard momentum strategy in calm times, but switches to the opposite contrarian strategy in one month after a market crash and keeps the contrarian position for three months, after which it reverts back to the momentum position. The dynamic momentum strategy turns all major momentum crashes into gains and yields average return, which is about 1.5 times as high as the standard momentum return. The dynamic momentum returns are positively skewed and not exposed to risk factors, have high Sharpe ratio and alpha, persist in different time periods and geographical markets around the globe.

Media coverage: CXO Advisory Group, AllAboutAlpha


Asymmetric Arbitrage Opportunities for Cross-Listed Stocks: Evidence from Russia (with E. Gorbatikov), Emerging Markets Finance and Trade 56(6), pp. 1402-1422, 2020.

Abstract. We study alternative arbitrage strategies for stocks of Russian companies and the corresponding depositary receipts issued in European exchanges (‘mirror trades’). We provide evidence for significant arbitrage opportunities in Russia, and the potential returns are higher when the depository receipts are underpriced relative to stocks on the domestic market. Such asymmetry in arbitrage returns may be a consequence of money expatriation from Russia using these ‘mirror trades’ even when they are unprofitable, creating further mispricing. We also show that the long-short ‘buy-and-hold’ strategies, although being risky, generate returns which are about twice as high as the returns to the conversion strategies. Although the arbitrage returns have declined over time, they are still positive and generally higher than the market returns. Low liquidity of Russian depositary receipts on European exchanges is a significant barrier to arbitrage.

Media coverage: IQ.HSE.RU (in Russian).


LEGO - The Toy of Smart Investors (with J. Kishilova), Research in International Business and Finance 59, January 2022, 101539. POSTER. DATA. Video-presentation (in Russian)

Abstract. We study financial returns on alternative collectible investment assets – toys - using LEGO sets as an example. Such iconic toys with diminishing over time supply and high collectable values appear to yield high returns on the secondary market. We find that LEGO investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have an almost unit exposure to the size factor. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the LEGO toy and other similar collectibles an attractive alternative investment with a good diversification potential.


Media coverage:


News: Bloomberg (USA), The Guardian (UK), Le Capital (France), Forbes (USA), (Russia), Visao (Portugal), Fortune (USA), Vox (USA), Le Point (France), Mental Floss (USA), Il Giornale (Italy), Kommersant (Russia), Money Control (India), The Times of India, ZAP Noticias (Portugal), Diario de Noticias (Portugal), Corriere del Ticino (Switzerland), Mononews (Greece), El Financiero (Mexico), (Switzerland), La Mescolanza (Italy), Ciberia (Brasil), Business Insider (Italy), Il Mattino (Italy), Zero Hedge, QuiFinanza (Italy), SwissInfo (Switzerland), Finans (Denmark), Marko-Momentum (Germany), Fidelity House (Italy), Pauta (Chile), RTL Z (Netherlands), L'Usine Nouvelle (France), DBA Guide (Denmark), HK01 (Hong Kong), Brand Inside Asia (Thailand), CXO Advisory Group, Independent (Ireland), the Guardian (UK), Independent (UK), the Sun (UK), the National News (UAE), Wales online (UK), Metro (UK), France Soir (France), Evening Standard (UK), the Times (UK), CANSTAR (Australia), DailyMail (UK), Freight Waves (USA).


Interviews: SpBTV (in Russian), RTVI (in Russian), Commersant FM (in Russian), Big Bang Radio program (in French, 09.02.2019), Brick Fanatics Magazine (in English), VC.RU (in Russian), EXAME (in Portugese), IQ.HSE.RU (in Russian), HSE (in Russian), NPR (in English), Cheddar News (in English), eNCA (South Africa, in English), CTV News (Canada, in English), France 2 News (in French), NBC (in English), World in the Pocket (in Russian), Wall Street Journal (in English).


LEGO specialized journals: Brick Fanatics, Brick Fanatics again, and many others...


SSRN weekly top 5


HSE Winter school'23 video-lecture


Does Momentum Trading Generate Extra Downside Risk? Quarterly Journal of Finance 12(2), June 2022, 2250001.

Abstract. Momentum strategies tend to provide low returns during market crashes, and they crash themselves when the market rebounds after significant crashes. This is reflected by positive downside market betas and negative upside market betas of zero-cost momentum portfolios. Such asymmetry in upside and downside risks is unfavorable for investors and requires a risk premium. It arises mechanically because of momentum portfolio rebalancing based on trailing asset performance. The asymmetry in upside and downside risks is a robust unifying feature of momentum portfolios in various geographical and asset markets. The momentum premium can be rationalized within a standard asset-pricing framework, where upside and downside risks are priced differently. 


Cryptocurrencies Meet Equities: Risk Factors and Asset-Pricing Relationships (with M. Dubrovskiy), International Finance Review 22, special issue  "Fintech, Pandemic, and the Financial System: Challenges and Opportunities", pp. 95-111, January 2023.

Abstract. We consider a variety of cryptocurrency and equity risk factors as potential forces that drive cryptocurrency returns and carry risk premiums. In a cross-section of 2,000 biggest cryptocurrencies during 2014-2020, only downside market risk, cryptocurrency size and policy uncertainty factors are systematically priced with significant premiums. Cryptocurrencies, which have greater exposures to these factors, yield higher returns subsequently. Equity market risk, particularly equity downside market risk, appears to be more important than cryptocurrency market risk, suggesting greater linkages between cryptocurrency and equity markets than we used to think. Global and US equity factors are more relevant for the cryptocurrency market than local factors from other markets. However, there is no evidence that exposure to momentum, volatility and Fama-French factors is compensated by higher returns.

Media coverage: IQ.HSE.RU (in Russian), IQ.HSE.RU (in English), TASS (in Russian), Naked Science (in Russian), PHYS.ORG (in English).


Cryptocurrency Momentum and Reversal, Journal of Alternative Investments 25(4), March 2023.

Abstract. We consider a variety of highly-diversified cross-sectional momentum and reversal strategies, with sorting and holding periods from 1 week up to 2 years. In a sample of 2,000 biggest cryptocurrencies during 2014-2020, we identify a positive momentum on short horizons up to 2-4 weeks and a significant reversal on longer horizons beyond 1 month. The reversal effect becomes more pronounced once we expand the sorting or holding periods, or both. Momentum and, particularly, reversal returns are economically large, statistically significant and are generally not exposed to standard cryptocurrency risk factors. The main drivers of the reversal effect are ‘past loser’ cryptocurrencies. The switching of momentum into reversal occurs approximately after 1 month, which is much quicker compared to the equity market and is evidence of ‘faster metabolism of cryptocurrencies’.  

Media coverage: Naked Science (in Russian), Finversia (in Russian), Financial One (in Russian), Yahoo Finance (in English).


Practical Applications of Cryptocurrency Momentum and Reversal, Practical Applications, July 2023.


Financial Returns in Reward-Based Crowdfunding (with J. Grebennikova), Economic Analysis Letters 2(3), pp. 1-9, May 2023.

Abstract. We quantify financial returns to backers in reward-based crowdfunding projects on Kickstarter and show that such investments provide profitable opportunities in addition to non-monetary benefits. The average unconditional annualized return is 11.5% and the average return on successful projects is 30%. Hence, backing money near the end of a campaign, when the probability of success is already high, is a profitable strategy. The most attractive is the Design category, where successful projects yield 73%, on average. Short-term projects are more profitable than long-term ones. Financial return is an important type of extrinsic motivation in reward-based crowdfunding, which has generally been neglected in academic literature. Reward-based crowdfunding outperforms other forms of crowdfunding and other common alternative investments.

Media coverage: AllAboutAlpha (in English), ТАSS Science (in Russian), Naked Science (in Russian), IQ.HSE.RU (in Russian).


Is Downside Risk in Priced in Cryptocurrency Market? International Review of Financial Analysis 91, January 2024, 102947.

Abstract. This paper explores the cryptocurrency market through the prism of traditional multifactor asset-pricing models with particular attention to the downside market risk. The analysis for about 2,000 cryptocurrencies reveals that there is a significant heterogeneity in the exposure to the downside market risk, and that a higher downside risk exposure is associated with higher average returns. This finding is irrespective of whether we use cryptocurrency market or equity market as the benchmark. The extra downside risk is priced with a statistically significant premium in cross-sectional regressions. Adding the downside risk component to the CAPM and the 3-factor Liu et al. (2022) model for cryptocurrencies improves the explanatory power of the models significantly. The downside risk is orthogonal to the size and momentum risks and constitutes an important component in the multifactor cryptocurrency pricing model. The result is robust in sub-samples of cryptocurrencies of different sizes.

Media coverage: AllAboutAlpha, Blockchain and Cryptocurrency Summit 2022, TASS Science, Naked Science, Finam, Rambler Finance

This lecture is part of the Blockchain and Cryptocurrency course, provided by the University of Naples Federico II.


Working papers

Buying Beauty? On Rarity and Returns in Non-Fungible Tokens (with D. Bianchi), January 2023. NEW

Abstract. We investigate the correlation between rarity and returns on investments in digital art in the form of non-fungible tokens (NFT) across three major comparable collections. Methodologically, we first quantify the “shadow” price of both individual rarity scores and aggregate market activity through the lens of an hedonic regression analysis which corrects for time-varying dispersion in prices. In addition, we delve into the cross sectional distribution of the returns across NFTs clustered by rarity scores and number of sales. The results point towards a positive (negative) correlation between the average performance and rarity (number of sales). Yet, the average performance is primarily due to outlying returns and is substantially lower when focusing on transactions on the secondary market.


Value Bubbles (with S. Ouzan and M. Chibane), September 2023. NEW

Abstract. According to several extended behavioral theories, value pro ts should mirror momentum progfits, and vary over time. We test these theories in the cross section of returns. Value returns depend on market states. From 1926 to 2020, following negative market return, the average so-called value premium is about three time its unconditional counterpart, whereas it appears to vanish following positive market return. Moreover, several short episodes of extreme losses in momentum strategy (momentum crashes) are contemporaneous with extreme value profits (value bubbles). Our results are robust to various time varying risk-based explanations.


Research-related interviews, invited talks and expert opinions for media

IQ.HSE.RU (Nobel prize, in Russian), Moskauer Deutsche Zeitung (cryptocurrencies, in German), World in the Pocket (toys, in Russian), Afisha Daily (toys, in Russian), JIWO.RU (cryptocurrencies, in Russian), ICEF mentor's seminar (cryptocurrencies, in English), Moldova open lectorium (invited talk, cryptocurrencies and NFTs, in Russian), Winter Economic School at HSE (invited talk, cryptocurrencies and NFTs, in Russian), PhD seminar at XXIV April HSE conference (keynote talk, dowside risk pricing in cryptocurrency markets, in English), HSE Winter school'23 for high school children (toys for investors, in Russian).