Bitcoin volatility and the introduction of bitcoin futures: A portfolio construction approach

Ahmed Bouteska and Murad Harasheh

Finance Research Letters, 2023, vol. 57, issue C

Abstract: We evaluate the introduction of Bitcoin futures on Bitcoin return and volatility using realized volatility and GARCH model pre-and post-futures. We also assess the portfolio construction implications by building two portfolios containing the top 25 S&P stocks, one without futures and one with. GARCH and realized volatility show mixed results. We provide that futures make Bitcoin riskier and more vulnerable to fluctuations over time. However, Bitcoin futures improve the portfolio's volatility and returns profile. Our findings offer implications regarding portfolio strategies implemented by risk-averse and risk-seeking investors and managers as we show how Bitcoin futures can hedge investments.

Keywords: Realized volatility; Bitcoin; Bitcoin futures; GARCH model; Portfolio construction (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:57:y:2023:i:c:s154461232300572x

DOI: 10.1016/j.frl.2023.104200

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