Bitcoin: The biggest financial innovation of fourth industrial revolution and a portfolio's efficiency booster

Jing-Ping Li, Bushra Naqvi, Syed Kumail Abbas Rizvi and Hsu-Ling Chang

Technological Forecasting and Social Change, 2021, vol. 162, issue C

Abstract: Fourth industrial revolution has brought with it a consistently growing use of technology in all fields of life, including finance and investment. Amidst all this, Bitcoin also emerged on the surface of the financial markets in 2008, as one of the biggest innovations of our century. However, since then, it has largely been scrutinized for the benefits and risks that it puts forth in terms of the economic growth, financial system's stability and the welfare of overall society. In this study, we evaluate how the financial industry can use Bitcoin for improving the efficiency and wealth of the society, by focusing on portfolio optimization. Our results show that Bitcoin has an enormous tendency to improve an investor's risk-return profile. This efficiency is clearly visible in the upward shifts of the efficient frontiers, once Bitcoin is added in the universe of investable assets. Bitcoin's efficiency is valid for when the short selling was, and, was not restricted. It is important to note that our findings are based on the data that spans over a timeframe of a decade, and provides a medium to long term perspective on Bitcoin, which was not the case with the earlier studies.

Keywords: Innovation; Bitcoin; Efficient frontier; Mean-variance; Sharpe ratio (search for similar items in EconPapers)
JEL-codes: G11 G23 O16 O33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0040162520312099
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:162:y:2021:i:c:s0040162520312099

DOI: 10.1016/j.techfore.2020.120383

Access Statistics for this article

Technological Forecasting and Social Change is currently edited by Fred Phillips

More articles in Technological Forecasting and Social Change from Elsevier
Bibliographic data for series maintained by Catherine Liu ().