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Optimal vs naïve diversification in cryptocurrencies

Author

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  • Platanakis, Emmanouil
  • Sutcliffe, Charles
  • Urquhart, Andrew

Abstract

This paper contributes to the literature on cryptocurrencies by examining the performance of naïve (1/N) and optimal (Markowitz) diversification in a portfolio of four popular cryptocurrencies. We employ weekly data with weekly rebalancing and show there is very little to select between naïve diversification and optimal diversification. Our results hold for different levels of risk-aversion and an alternative estimation window.

Suggested Citation

  • Platanakis, Emmanouil & Sutcliffe, Charles & Urquhart, Andrew, 2018. "Optimal vs naïve diversification in cryptocurrencies," Economics Letters, Elsevier, vol. 171(C), pages 93-96.
  • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:93-96
    DOI: 10.1016/j.econlet.2018.07.020
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    References listed on IDEAS

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    1. repec:eee:finana:v:63:y:2019:i:c:p:49-57 is not listed on IDEAS
    2. repec:eee:finana:v:62:y:2019:i:c:p:182-199 is not listed on IDEAS
    3. repec:eee:ecolet:v:177:y:2019:i:c:p:76-80 is not listed on IDEAS
    4. Elie Bouri & Konstantinos Gkillas & Rangan Gupta, 2019. "Trade Uncertainties and the Hedging Abilities of Bitcoin," Working Papers 201948, University of Pretoria, Department of Economics.

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