Cryptocurrency-portfolios in a mean-variance framework

Alexander Brauneis and Roland Mestel ()

Finance Research Letters, 2019, vol. 28, issue C, 259-264

Abstract: We apply the Markowitz mean-variance framework in order to assess risk-return benefits of cryptocurrency-portfolios. Using daily data of the 500 most capitalized cryptocurrencies for the time span 1/1/2015 to 12/31/2017, we relate risk and return of different mean-variance portfolio strategies to single cryptocurrency investments and two benchmarks, the naively diversified portfolio and the CRIX. In an out-of-sample analysis accounting for transaction cost we find that combining cryptocurrencies enriches the set of ‘low’-risk cryptocurrency investment opportunities. In terms of the Sharpe ratio and certainty equivalent returns, the 1/N-portfolio outperforms single cryptocurrencies and more than 75% of mean-variance optimal portfolios.

Keywords: Cryptocurrencies; Portfolio optimization; Markowitz; Naive diversification (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (59)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:28:y:2019:i:c:p:259-264

DOI: 10.1016/j.frl.2018.05.008

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