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Large cryptocurrency-portfolios: efficient sorting with leverage constraints

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  • Yang Yang
  • Zhao Zhao

Abstract

Using daily data of the 100 largest cryptocurrencies, we construct the efficient sorting portfolios and the quantile-based sorting portfolios based on ten factors. We find two price factors that can well predict cryptocurrency returns. The efficient sorting portfolios outperform the traditional quantile-based portfolios and the naive $$1/N$$1/N portfolios. The outperformance is largely due to the use of DCC-NL estimator, which captures the dynamic of covariance matrix and meanwhile addresses the curse of dimensionality. In addition, leverage constraints are important for cryptocurrency portfolios to control their risks.

Suggested Citation

  • Yang Yang & Zhao Zhao, 2021. "Large cryptocurrency-portfolios: efficient sorting with leverage constraints," Applied Economics, Taylor & Francis Journals, vol. 53(21), pages 2398-2411, May.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:21:p:2398-2411
    DOI: 10.1080/00036846.2020.1859457
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