Portfolio management and dependence structure between cryptocurrencies and traditional assets: evidence from FIEGARCH-EVT-Copula

Ahmed Jeribi () and Mohamed Fakhfekh ()
Additional contact information
Ahmed Jeribi: Faculty of Economics and Management of Mahdia
Mohamed Fakhfekh: Higher Institute of Business Administration of Sfax

Journal of Asset Management, 2021, vol. 22, issue 3, No 6, 224-239

Abstract: Abstract The purpose of this paper is twofold. Firstly, it discusses the relationship between five cryptocurrencies, oil prices, and US indices. Secondly, it focuses on determining the best portfolio hedging strategy. Using daily data relevant to the period ranging from January 4, 2016, to November 29, 2019, this study applies the FIEGARCH-EVT-Copula and Hedge ratios analysis. The findings obtained have shown that the crude oil (WTI) and the US indices return highlights the persistence of a negative and significant leverage effect while the cryptocurrency markets present a positive asymmetric volatility effect. Moreover, this paper show evidence of very weak dependence between all the different pairs considered before and after the introduction of Bitcoin Futures. Based on the Hedging ratio and mean-variance approach, this article suggests that to minimize the risk while keeping the same expected returns of the digital-conventional financial asset portfolio, the investor should hold more conventional financial assets than digital assets except for WTI-Bitcoin, WTI- Dash and WTI-Ethereum pairs which the values of their hedge ratios are rather important with respect to OLS regression.

Keywords: Extreme dependence structure; Copula approach; Hedge ratio; Cryptocurrencies; Traditional assets; Bitcoin futures (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://link.springer.com/10.1057/s41260-021-00211-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:pal:assmgt:v:22:y:2021:i:3:d:10.1057_s41260-021-00211-7

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/s41260-021-00211-7

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().