Abstract
We assess the out-of-sample performance of Bitcoin within portfolios of various asset classes and a well-diversified portfolio under four strategies and estimate the economic gains net of transaction costs. We find statistically significant diversification benefits from the inclusion of Bitcoin which are more pronounced for commodities. Most importantly, the decrease in the overall portfolio risk due to the low correlation of Bitcoin with other assets is not offset by its high volatility. However, the inclusion of Bitcoin pays off little if investors accommodate a battery of economic instruments. Considering non-bubble conditions that are not marked by explosive prices in cryptocurrencies, we document substantially diminished benefits.
| Original language | English |
|---|---|
| Pages (from-to) | 97-110 |
| Number of pages | 14 |
| Journal | Research in International Business and Finance |
| Volume | 48 |
| Early online date | 5 Dec 2018 |
| DOIs | |
| Publication status | Published - Apr 2019 |
Keywords
- Bitcoin
- Portfolio
- Economic value
- Non-Bubble
- Dynamic Conditional Correlation
Profiles
-
Konstantinos Chalvatzis
- Norwich Business School - Professor of Sustainable Energy Business
- Vice-Chancellor's Office - Academic Chair ClimateUEA
- Centre for Competition Policy - Member
- Tyndall Centre for Climate Change Research - Member
- Innovation, Technology and Operations Management - Member
- ClimateUEA - Academic Chair
- CreativeUEA - Steering Committee Member
Person: Research Group Member, Research Centre Member, Academic, Teaching & Research