The S&P500 or DAX30 are important benchmarks for the financial industry. These and
other indices describe different compositions of certain segments of the financial markets.
For currency markets, the IMF offers the index SDR. Prior to the Euro, the ECU existed,
which was an index representing the development of European currencies. It is surprising,
though, to see that the common index providers have not mapped emerging e-coins into an
index yet because with cryptos like Bitcoin, a new kind of asset of great public interest has
arisen. Index providers decide on a fixed number of index constituents which will represent
the market segment. It is a huge challenge to set this fixed number and develop the rules
to find the constituents, especially since markets change and this has to be taken into
account. A method relying on the AIC is proposed to quickly react to market changes and
therefore enable us to create an index, referred to as CRIX, for the cryptocurrency market.
The codes used to obtain the results in this paper are available via www.quantlet.de .
Index construction, model selection, AIC, bitcoin, cryptocurrency, CRIX