Managing cryptocurrency risk exposures in equity portfolios: Evidence from high-frequency data

Minhao Leong, Vitali Alexeev and Simon Kwok

Journal of International Financial Markets, Institutions and Money, 2025, vol. 99, issue C

Abstract: We investigate the evolving relationships between cryptocurrencies and equity portfolios and find that Bitcoin’s contributions to the active risks of equity portfolios have grown over time, exceeding 10% in defensive strategies. This underscores the increasing importance of investment professionals quantifying and managing crypto-related risk exposures in their portfolios, a task for which we provide guidance. For risk measurement, we use intraday returns to significantly improve the forecast accuracy of equity portfolio sensitivities to cryptocurrency risks. For risk management, we advocate direct hedging for optimal risk reduction and suggest using stock selection constraints as an alternative approach to limit the influence of cryptocurrencies on portfolio risk exposures.

Keywords: Cryptocurrency; High-frequency data; Equity portfolio; Risk management (search for similar items in EconPapers)
JEL-codes: C58 G10 G15 G17 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:99:y:2025:i:c:s1042443125000137

DOI: 10.1016/j.intfin.2025.102123

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