Low-volatility strategies for highly liquid cryptocurrencies

Orçun Kaya and Mehdi Mostowfi

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Managing extreme price fluctuations in cryptocurrency markets are of central importance for investors in this market segment. Using a sample of highly liquid cryptocurrencies from January 2017 to June 2021, this paper proposes a dynamic investment strategy that selects cryptocurrencies based on their historical volatility and is complemented by a simple stop-loss rule. Our results reveal that investing in highly concentrated low volatility cryptocurrency portfolios with six to twelve months volatility look-back and holding period generate statistically significant excess returns. By including a simple stop-loss rule, the downside risk of cryptocurrency portfolios is reduced markedly, and the Sharpe ratios are improved significantly.

Keywords: Cryptocurrencies; Portfolio optimization; Volatility; Stop-loss rules (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321004116
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004116

DOI: 10.1016/j.frl.2021.102422

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().