Bitcoin: like a satellite or always hardcore? A core–satellite identification in the cryptocurrency market

Christoph J. Börner (), Ingo Hoffmann (), Jonas Krettek () and Tim Schmitz ()
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Christoph J. Börner: Heinrich Heine University Düsseldorf
Ingo Hoffmann: Heinrich Heine University Düsseldorf
Jonas Krettek: Heinrich Heine University Düsseldorf
Tim Schmitz: Heinrich Heine University Düsseldorf

Journal of Asset Management, 2022, vol. 23, issue 4, No 3, 310-321

Abstract: Abstract Cryptocurrencies (CCs) have become increasingly interesting for institutional investors’ strategic asset allocation and will therefore be a fixed component of professional portfolios in the future. However, this asset class differs from established assets primarily in that it has a higher standard deviation and tail risk. The question then arises whether CCs with similar statistical key figures exist. On this basis, a core market incorporating CCs with comparable properties enables the implementation of a tracking error approach. A prerequisite for this is the segmentation of the CC market into a core and a satellite, with the latter comprising the accumulation of the residual CCs remaining in the complement. Using a concrete example, we segment the CC market into these components based on modern methods from image/pattern recognition.

Keywords: Cryptocurrencies; Core–satellite identification; Market segmentation; Pattern recognition (search for similar items in EconPapers)
JEL-codes: C14 C46 C55 E22 G10 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41260-022-00267-z

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