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Investment in Cryptocurrencies: lessons for asset pricing and portfolio theory

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  • Michael Dempsey
  • Huy Pham
  • Vikash Ramiah

Abstract

We consider the performance of cryptocurrencies in the light of fundamental asset pricing and portfolio theory. We observe how a traditional focus on reducing asset return volatility with Markowitz diversification misses the significance of such volatility for growth. The recognition that asset growth is more likely subject to exponential or continuously compounding growth characteristics reveals that asset volatility can be exploited both across assets and across investment periods to deliver superior returns.

Suggested Citation

  • Michael Dempsey & Huy Pham & Vikash Ramiah, 2022. "Investment in Cryptocurrencies: lessons for asset pricing and portfolio theory," Applied Economics, Taylor & Francis Journals, vol. 54(10), pages 1137-1144, February.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:10:p:1137-1144
    DOI: 10.1080/00036846.2021.1998321
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    Cited by:

    1. Almaqableh, Laith & Reddy, Krishna & Pereira, Vijay & Ramiah, Vikash & Wallace, Damien & Francisco Veron, Jose, 2022. "An investigative study of links between terrorist attacks and cryptocurrency markets," Journal of Business Research, Elsevier, vol. 147(C), pages 177-188.
    2. Etienne Harb & Charbel Bassil & Talie Kassamany & Roland Baz, 2024. "Volatility Interdependence Between Cryptocurrencies, Equity, and Bond Markets," Computational Economics, Springer;Society for Computational Economics, vol. 63(3), pages 951-981, March.

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