Does bitcoin still enhance an investment portfolio in a post Covid-19 world?

Michael Gorman and W. Keener Hughen

Finance Research Letters, 2024, vol. 62, issue PB

Abstract: We investigate the ability of bitcoin to enhance investment portfolios of traditional assets. We find evidence of a structural break in the correlation and volatility processes around the onset of the Covid-19 pandemic. The correlations between bitcoin and traditional assets have increased, thereby reducing bitcoin’s diversification benefits. As a result prior studies using data from pre-2020 may have inadvertently overestimated the value of bitcoin in improving Sharpe ratios and certainty equivalent returns in the post-pandemic era.

Keywords: Bitcoin; Covid-19; DCC; Diversification benefits; Portfolio performance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002009

DOI: 10.1016/j.frl.2024.105170

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