Portfolio Optimalization on Digital Currency Market

Jaroslav Mazanec
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Jaroslav Mazanec: Department of Qualitative Methods and Economic Informatics, The Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 8215/1, 010 26 Zilina, Slovakia

JRFM, 2021, vol. 14, issue 4, 1-15

Abstract: Virtual currency represents a specific technological innovation on financial markets. Bitcoin and other cryptocurrencies are popular alternatives to traditional cash and investment. We indicate a research gap in the literature review. We find out that current research focused rarely on portfolio diversification using bibliographic analysis in VOSviewer. We think that portfolio diversification is extremely important on the crypto market for most investors because virtual currencies are very risky compared to traditional assets. The primary aim is to construct an optimal portfolio consisting of several cryptocurrencies without traditional assets using a modern theory portfolio. The total sample consists of 16 virtual currencies from 1 October 2017 to 13 January 2020. We mainly obtain historical data on the daily close price of cryptocurrencies from Yahoo Finance. The results show that the optimal portfolio using Markowitz approach consists of Cardano, Binance Coin, and Bitcoin. In addition, virtual currencies are moderately Correlated, with the exception of Tether based on correlation analysis. The high correlation is dangerous for cryptocurrency in portfolio diversification. However, Tether is an atypical virtual currency compared to other cryptocurrencies.

Keywords: portfolio; optimalization; risk; virtual currency; cryptocurrency; market (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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