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Performance measurement of crypto funds

Author

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  • Dombrowski, Niclas
  • Drobetz, Wolfgang
  • Momtaz, Paul P.

Abstract

Crypto funds (CFs) are a growing intermediary in cryptocurrency markets. We evaluate CF performance using metrics based on alphas, value at risk, lower partial moments, and maximum drawdown. The performance of actively managed CFs is heterogeneous: While the average fund in our sample does not outperform the overall cryptocurrency market, there seem to be some few funds with superior skills. Given the non-normal nature of fund returns, the choice of the performance measure affects the rank orders of funds. Compared to the Sharpe ratio, the most commonly applied metric in the asset management practice, performance measures based on alphas and maximum drawdown lead to diverging fund rankings. Depending on their ranking order of preferences, CF investors should consider a bundle of metrics for fund selection and performance measurement.

Suggested Citation

  • Dombrowski, Niclas & Drobetz, Wolfgang & Momtaz, Paul P., 2023. "Performance measurement of crypto funds," Economics Letters, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:ecolet:v:228:y:2023:i:c:s016517652300143x
    DOI: 10.1016/j.econlet.2023.111118
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    References listed on IDEAS

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    Cited by:

    1. Lars Hornuf & Paul P. Momtaz & Rachel J. Nam & Ye Yuan, 2023. "Cybercrime on the Ethereum Blockchain," CESifo Working Paper Series 10598, CESifo.
    2. Kirill Kolmykov, 2023. "Analysis of Decentralization in Governance and Financial Efficiency of Companies: Studying the Relationship in the Field of Decentralized Finance," Papers 2311.02434, arXiv.org.

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    More about this item

    Keywords

    Crypto funds; Active investment management; Performance measurement; Fund selection; Blockchain-based digital assets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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