Cryptocurrencies as an asset class in portfolio optimisation

AbstractIn 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.

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University Endowment Committees, Modern Portfolio Theory and Performance

Journal of Risk and Financial Management ◽

10.3390/jrfm13090198 ◽

2020 ◽

Vol 13 (9) ◽

pp. 198

Author(s):

Mimi Lord

Keyword(s):

Decision Making ◽

Decision Process ◽

Portfolio Theory ◽

Portfolio Diversification ◽

Decision Making Process ◽

Modern Portfolio Theory ◽

Asset Classes ◽

Decision Making Framework ◽

And Performance

University endowments with broad portfolio diversification have been correlated with performance, but committees’ decision-making process has received relatively little attention. This study is unique in postulating that the committee’s learning commitment and open-mindedness are significant contributors to a decision process that is based on the principles of Modern Portfolio Theory (or, simply, Portfolio Theory). The use of Portfolio Theory as a decision-making framework leads to greater portfolio diversification, which, in turn, leads to higher risk-adjusted returns. This study also demonstrates that greater committee expertise across multiple asset classes contributes to more diversified portfolios.

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Correlation of Uncorrelated Asset Classes

10.51240/jibe.2008.2.1 ◽

2008 ◽

Vol 9 (2) ◽

pp. 1-12

Author(s):

Jeffry Haber ◽

Andrew Braunstein

Keyword(s):

Portfolio Theory ◽

Portfolio Diversification ◽

Random Numbers ◽

Statistical Measure ◽

Modern Portfolio Theory ◽

Investment Return ◽

Key Driver ◽

Asset Classes

Diversification of a portfolio has long been held as one of the cornerstones of modern portfolio theory and a key driver of investment return over the long term. Correlation is the statistical measure used to quantify diversification. The degree to which asset classes correlate will determine the degree of portfolio diversification (or lack thereof). Many investment products are being sold that claim of correlation utilizing two series of random numbers, as well. For and misleading.

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Assessment of cryptocurrencies as an asset class by their characteristics

Investment Management and Financial Innovations ◽

10.21511/imfi.15(3).2018.14 ◽

2018 ◽

Vol 15 (3) ◽

pp. 169-181 ◽

Cited By ~ 6

Author(s):

Thomas Ankenbrand ◽

Denis Bieri

Keyword(s):

Foreign Exchange ◽

Cost Effective ◽

Financial Industry ◽

Risk And Return ◽

Risk Return ◽

The Past ◽

Asset Class ◽

Asset Classes ◽

Financial Characteristics ◽

Individual Asset

The cryptocurrency market has witnessed significant growth in the past few months. The emergence of hundreds of new digital currencies and the huge increase in the prices of their leading representatives have attracted a lot of attention from investors. However, the financial characteristics of the cryptocurrency markets have not been systematically evaluated yet. As a consequence, there is currently no consensus on whether cryptocurrencies constitute an individual asset class or if they share substantial similarities to stocks, bonds, commodities or foreign exchange. Based on Markowitz et al. (2017) this paper aims to fill this lack of research by evaluating the cryptocurrency market based on seven requirements of an individual asset class. The authors find that the cryptocurrency market distinguishes itself remarkably from established asset classes in terms of risk and return. Additionally, the low correlation between the cryptocurrency markets and these established asset classes induces a diversification potential for investors, leading to more favorable risk/return profiles of their portfolios. But also the emergence of investment services and products provided by the financial industry and the increasingly cost-effective access to cryptocurrencies corroborate the conclusion that cryptocurrencies can be seen as an individual asset class.

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