Score-driven cryptocurrency and equity portfolios

Szabolcs Blazsek and Richard Bowen

Applied Economics, 2024, vol. 56, issue 18, 2109-2128

Abstract: This paper discusses whether the Bitcoin exchange-traded fund (ETF), which tracks the value of Bitcoin, improves equity portfolios, by using a robust portfolio performance analysis. The equity portfolio is represented by an ETF that tracks the Standard & Poor’s 500. We use data from a turbulent investment period within the coronavirus pandemic, to study the diversification benefits of Bitcoin. We compare the performances of diverse portfolios composed of both ETFs, which include 40 classical dynamic volatility model-based portfolios and 900 score-driven portfolios. For the score-driven portfolios, the dynamic association is modelled by score-driven Clayton, rotated Clayton, Gumbel, rotated Gumbel and Student’s t copulas. We compare portfolio strategies using the model confidence set test. We find that score-driven portfolios outperform classical volatility model-based portfolios and the equity portfolio. Our results may provide suggestions for cryptocurrency investors on portfolio optimization and may also have policy implications for regulators and policymakers.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2023.2182406 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:56:y:2024:i:18:p:2109-2128

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2023.2182406

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().