Cryptocurrency-portfolios in a mean-variance framework

By Alexander Brauneis, Roland Mestel. Finance Research Letters, 2019

173 citations recorded by the source corpus.

Abstract We apply the Markowitz mean-variance framework in order to assess risk-return benefits of cryptocurrency-portfolios. Using daily data of the 500 most capitalized cryptocurrencies for the time span 1/1/2015 to 12/31/2017, we relate risk and return of different mean-variance portfolio strategies to single cryptocurrency investments and two benchmarks, the naively diversified portfolio and the CRIX. In an out-of-sample analysis accounting for transaction cost we find that combining cryptocurrencies enriches the set of ‘low’-risk cryptocurrency investment opportunities. In terms of the Sharpe ratio and certainty equivalent returns, the 1/N-portfolio outperforms single cryptocurrencies and more than 75% of mean-variance optimal portfolios.

Subfields: Economics and Econometrics, Finance, Information Systems

View Paper: https://www.semanticscholar.org/paper/c62416f4d53ddf94a797fabed6b594ce5e1b362f

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Citations in the corpus

Cryptocurrencies as a financial asset: A systematic analysis (2019, methodology): “Brauneis and Mestel [2018a] assessed the effects of diversified cryptocurrency investments in a traditional Markowitz mean-variance framework using a broad sample of the 500 most capitalized cryptocurrencies as of December 2017 employing daily data from January 1, 2015 to 31 December, 2017.”