Performance of crypto-Forex portfolios based on intraday data

Carlos Esparcia and Raquel López

Research in International Business and Finance, 2024, vol. 69, issue C

Abstract: This study identifies and assesses the diversification benefits of including large-cap and highly liquid cryptocurrencies into portfolios comprised of major fiat currencies quoted against the USD. We employ hourly data over the period from January 01, 2019 to May 31, 2021. We identify hedging properties across crypto-currency pairs based on intraday volatility fitting through multiplicative component Generalized Autoregressive Conditional Heteroscedasticity (mcGARCH) models and the estimation of Dynamic Conditional Correlation (DCC) Skew Student Copulas. We find that the optimal diversified crypto-Forex portfolio outperforms the actively and passively managed Forex portfolios based on both total risk and downside and upside risk performance measures. Outperformance is robust to different market conditions and optimization methods.

Keywords: Diversification; Cryptocurrencies; Forex; Intraday frequency; McGARCH; Skew Student Copula (search for similar items in EconPapers)
JEL-codes: C52 C54 G01 G11 G17 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000096

DOI: 10.1016/j.ribaf.2024.102217

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