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Is Bitcoin the 'Paris Hilton' of the Currency World? Or Are the Early Investors onto Something That Will Make Them Rich?

Abdur Chowdhury ()

No 2014-01, Working Papers and Research from Marquette University, Center for Global and Economic Studies and Department of Economics

Abstract: The Bitcoin phenomenon, and the technological innovation that made it possible, is interesting - but for investors large and small, the more pertinent question is whether they should buy the virtual currency or avoid it. We analyze a Bitcoin investment from the standpoint of a U.S. investor with a diversified portfolio. Bitcoin investment shows high average return as well as volatility. Mean-variance Spanning tests show that Bitcoin investment offers significant diversification benefits. Well diversified portfolios with a small Bitcoin component (2%) shows small improvement in the risk-return trade-off.

Keywords: Bitcoin; risk; return; virtual currency (search for similar items in EconPapers)
JEL-codes: G11 O16 E44 (search for similar items in EconPapers)
Date: 2014-01
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