Economics at your fingertips  

Cryptocurrencies from the perspective of euro investors: a re-examination of diversification benefits and a new day-of-the-week effect

Gregor Dorfleitner () and Carina Lung
Additional contact information
Gregor Dorfleitner: University of Regensburg
Carina Lung: University of Regensburg

Journal of Asset Management, 2018, vol. 19, issue 7, 472-494

Abstract: Abstract We examine diversification benefits of several cryptocurrencies between 11 August 2015 and 7 August 2018 using mean–variance spanning tests. Among the eight cryptocurrencies under study, we find that all single cryptocurrencies besides one as well as a combination thereof yield significant diversification benefits when being added to a well-diversified benchmark portfolio. However, the improvement solely stems from an increase in portfolio returns, not a reduction of risk. Along with that distinction, we find that the overall beneficial impact of cryptocurrencies only holds for bullish market phases throughout our observation period, but vanishes completely throughout the price collapse of cryptocurrencies in 2018. Furthermore, we model daily differences in the returns and volatility of cryptocurrencies with an EGARCH model. Throughout the observation period considered, returns of all eight cryptocurrencies on Sundays are significantly lower than those on other days. A similar but less distinctive pattern is also observable for their conditional variance. One possible reason for the negative Sunday effect is the lower trading volume observed on Sundays, in connection with the assumption of a causal relationship between trading volume and asset returns and volatility as suggested by the mixture of distributions hypothesis.

Keywords: Cryptocurrencies; Mean–variance spanning; Portfolio diversification; Day-of-the-week effects (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-04-09
Handle: RePEc:pal:assmgt:v:19:y:2018:i:7:d:10.1057_s41260-018-0093-8