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The impacts of cryptocurrencies in the performance of Brazilian stocks' portfolios

Mateus Portelinha (), Carlos Heitor Campani () and Raphael Roquete ()
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Mateus Portelinha: Coppead - Universidade Federal do Rio de Janeiro
Carlos Heitor Campani: Professor of Finance at Coppead - UFRJ and Research Associate at Edhec-Risk Institute
Raphael Roquete: FACC - Universidade Federal do Rio de Janeiro

Economics Bulletin, 2021, vol. 41, issue 3, 1919-1931

Abstract: This study analyses the impact of including cryptocurrencies in Brazilian stocks' portfolios performances from September 2014 to April 2020. The comparisons were made between stocks' only portfolios against portfolios that allowed stocks and cryptocurrencies. Three portfolios served as benchmarks: the naïve but relevant equally weighted portfolio, the tangency and the MVP portfolios built from the Markowitz mean-variance theory. Performances were compared through out-of-sample returns, volatilities, Sharpe, Sortino and Omega ratios. Our results indicate positive statistically significant return and risk-adjusted improvements after the inclusion of cryptocurrencies, although also increasing the volatility. The equally weighted portfolios with cryptocurrencies often outperformed the tangency and minimum variance models, which only exhibited better results when more data was used as input to the models. Moreover, the portfolios that included cryptocurrencies consistently outperformed the IBrX-100 in the period studied. The results of this study are important for investors and fund managers, especially because cryptocurrencies are yet not considered by most of them.

Keywords: Cryptocurrencies; Optimal portfolio strategy; Out-of-sample performance; Diversification; Portfolio optimization; Brazil; Naïve portfolio; Mean-variance portfolio (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2021-09-17
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