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Portfolio diversification across cryptocurrencies

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  • Liu, Weiyi

Abstract

Utilizing the empirical data of ten major cryptocurrencies, this article examines the investablitiy and role of diversification in cryptocurrency market, and evaluates the out-of-sample performance of commonly used asset allocation models across cryptocurrencies. We show that portfolio diversification across different cryptocurrencies can significantly improve the investment results. We also find robust evidence that the maximum utility model dominates the out-of-sample utility, although none of the models can consistently beat the naïve 1/N portfolio in Sharpe ratio.

Suggested Citation

  • Liu, Weiyi, 2019. "Portfolio diversification across cryptocurrencies," Finance Research Letters, Elsevier, vol. 29(C), pages 200-205.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:200-205
    DOI: 10.1016/j.frl.2018.07.010
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    References listed on IDEAS

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    More about this item

    Keywords

    Cryptocurrency; Portfolio diversification; Out-of-sample performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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