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Optimizing portfolio performance with DeFi tokens: Insights from a dynamic R-vine copula-based mean-CVaR approach

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  • Raza, Syed Ali
  • Sharif, Arshian
  • Anwar, Rija

Abstract

Decentralized Finance (DeFi) Tokens have appeared as a unique and swiftly developing investment category, as a result, understanding their performance is crucial in terms of investment portfolios. Existing literature consists of numerous studies on DeFi tokens, including connectedness between DeFi tokens and other asset categories during crucial periods like COVID-19, and the existence of bubbles in DeFi markets, however, the portfolio performance of DeFi tokens has not yet been investigated. Therefore, this study examines the portfolio performance with DeFi tokens using a Dynamic R-vine Copula-Based Mean-CVaR Approach for period ranges 19–03–2018 to 20–03–2023. Results demonstrate that ChainLink has a better risk and return profile in most asset allocation strategies for both in-sample and out-of-sample techniques. However, the portfolio with Maker performs well as compared to Synthetix and Basic Attention Token. The portfolio with ChainLink exhibits significant performance metrics among other DeFi tokens portfolios. This study delivers knowledge for researchers and market participants regarding the performance of DeFi tokens in the portfolios to provide in-depth analysis and a foundation for further investigation. Furthermore, these useful insights will assist investors, financial advisors, and financial institutions to make crucial investment decisions.

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  • Raza, Syed Ali & Sharif, Arshian & Anwar, Rija, 2025. "Optimizing portfolio performance with DeFi tokens: Insights from a dynamic R-vine copula-based mean-CVaR approach," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001898
    DOI: 10.1016/j.ribaf.2025.102933
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