DO CRYPTOCURRENCIES OFFER DIVERSIFICATION BENEFITS FOR EQUITY PORTFOLIOS?

Florin Aliu, Artor Nuhiu, Adriana Knapkova, Ermal Lubishtani and Khang Tran
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Florin Aliu: Faculty of Economics, University for Business and Technology, Kosovo
Artor Nuhiu: Faculty of Law, University of Prishtina, Kosovo
Adriana Knapkova: Faculty of Management and Economics, Tomas Bata University, Czech Republic
Ermal Lubishtani: Faculty of Economics, University for Business and Technology, Kosovo
Khang Tran: Faculty of Management and Economics, Tomas Bata University, Czech Republic

Studies in Business and Economics, 2021, vol. 16, issue 2, 5-18

Abstract: Cryptocurrencies are becoming an exciting topic for legislative bodies, practitioners, media, and scholars with diverse academic backgrounds. The work identifies diversification benefits when cryptocurrencies are combined with the equity instruments from Visegrad Stock Exchanges. Furthermore, the results of the study explore financial and economic benefits for the investors of combining cryptocurrencies with equity stocks on the mixed portfolio. Three different independent experiments were conducted to observe diversification benefits generated from cryptocurrencies. Results from the two experiments show that cryptocurrencies employ higher portfolio risk and generate higher returns when they are involved with equity stocks portfolios. The first experiment indicates that cryptocurrencies reduce the risk level of the equity portfolios while increase average returns. Providing the equity portfolios with additional equity stocks lower the portfolio risk which is in line with the theoretical paradigms. Results indicate that cryptocurrencies must be seriously considered by the portfolio managers as an essential aspect of the portfolio diversification benefits. Future studies might raise the samples of selected portfolios with stocks from different stock indexes, to identify the problem from a broader perspective.

Keywords: Cryptocurrencies; Portfolio risk; Equity stocks; Financial investors; Regulators (search for similar items in EconPapers)
Date: 2021
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