Cryptocurrencies as an asset class in portfolio optimisation

Holovatiuk Olha ()
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Holovatiuk Olha: Master in Quantitative Finance, University of Warsaw, Master in International Economics, Odessa National Economic University

Central European Economic Journal, 2020, vol. 7, issue 54, 33-55

Abstract: In this paper, cryptocurrencies are analysed as investment instruments. The study aims to verify whether they can be classified as an asset class and what kind of benefits they may bring to the investor's portfolio. We used 6 indices as proxies for the major asset classes, including the cryptocurrency index CRIX, for all cryptographic assets.Cryptocurrencies relatively fully satisfied 7 asset class requirements, namely stable aggregation, investability, internal homogeneity, external heterogeneity, expected utility, selection skill and cost-effective access. It was found that crypto assets have diversification properties. Portfolio optimisation with the Modern Portfolio Theory showed an increase in the Sharpe ratio of tangency portfolios with the inclusion of CRIX. However, the Post-Modern Portfolio Theory identified significant deterioration of the downside risk and the Sortino ratio.

Keywords: cryptocurrencies; blockchain technology; asset class; portfolio optimisation; Modern Portfolio Theory; Post-Modern Portfolio Theory (search for similar items in EconPapers)
JEL-codes: C61 G11 G12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ceuecj:v:7:y:2020:i:54:p:33-55:n:2

DOI: 10.2478/ceej-2020-0004

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