The Mean-Variance Core of Cryptocurrencies: When More is Not Better

Valentina Galvani and Vita Faychuk ()
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Vita Faychuk: Gustavus Adolphus College

No 2022-4, Working Papers from University of Alberta, Department of Economics

Abstract: We explore the existence of a mean-variance core subset of cryptocurrencies that subsumes the risk-reward of the broader market. The analysis considers both the perspective of long-short and long-only investors. The results indicate that most cryptocurrencies are redundant from the standpoint of both types of investors, with the exception of Bitcoin, which consistently improves the Sharpe ratio of even broad cryptocurrency portfolios. We show that the core can be often identified ex-ante as the cryptocurrencies attracting the highest levels of investors’ attention.

Keywords: Sharpe Ratio; Cryptocurrencies; Bitcoin; Short-Selling; Spanning (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G40 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2022-03-24
New Economics Papers: this item is included in nep-fmk, nep-ore, nep-pay and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2022_004

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