Cryptocurrency Portfolio Selection—A Multicriteria Approach

Abstract

This paper proposes the PROMETHEE II based multicriteria approach for cryptocurrency portfolio selection. Such an approach allows considering a number of variables important for cryptocurrencies rather than limiting them to the commonly employed return and risk. The proposed multiobjective decision making model gives the best cryptocurrency portfolio considering the daily return, standard deviation, value-at-risk, conditional value-at-risk, volume, market capitalization and attractiveness of nine cryptocurrencies from January 2017 to February 2020. The optimal portfolios are calculated at the first of each month by taking the previous 6 months of daily data for the calculations yielding with 32 optimal portfolios in 32 successive months. The out-of-sample performances of the proposed model are compared with five commonly used optimal portfolio models, i.e., naïve portfolio, two mean-variance models (in the middle and at the end of the efficient frontier), maximum Sharpe ratio and the middle of the mean-CVaR (conditional value-at-risk) efficient frontier, based on the average return, standard deviation and VaR (value-at-risk) of the returns in the next 30 days and the return in the next trading day for all portfolios on 32 dates. The proposed model wins against all other models according to all observed indicators, with the winnings spanning from 50% up to 94%, proving the benefits of employing more criteria and the appropriate multicriteria approach in the cryptocurrency portfolio selection process.

Fast Popularity Value Calculation of Virtual Cryptocurrency Trading Stage Based on Machine Learning

“…In addition, many innovative methods are proposed for reference in terms of how to analyze the data of virtual cryptocurrency transactions and how to select variables. In literature [25], for example, this paper proposes a virtual encryption based on PROMETHEE II currency trading portfolio selection criterion method, and the model of sample performance with five other kinds commonly used the optimal portfolio model; according to the index of all observed, the proposed model is better than all the other models, where the odds ratio is from 50 to 94%. The literature also suggests the benefits of adopting more currency standards and an appropriate multi-parameter approach in the analysis and selection process of virtual cryptocurrency transaction data.…”

A multi-criteria approach to rating Metaverse games

“…PROMETHEE II is also applied in cryptocurrency studies. Researchers such as Kądziołka [33] and Aljinović et al [34] employed the PROMETHEE II methodology in the field of cryptocurrencies. Kądziołka [33] used the PROMETHEE II method to create a ranking of cryptocurrency exchanges.…”

“…Moreover, we go further than ranking projects and provide a framework for rating them. Aljinović et al [34] use PROMETHEE II for cryptocurrency portfolio selection and cite "incorporating criteria that, to the best of our knowledge, have never been used before in portfolio optimization" as one of their contributions to the existing literature. We also develop special criteria that, to the best of our knowledge, have never been used before in blockchain project evaluations.…”

“…We also develop special criteria that, to the best of our knowledge, have never been used before in blockchain project evaluations. Aljinović et al [34] study sample consists of nine cryptocurrencies: Bitcoin, Dash, Ethereum Classic, Ethereum, Litecoin, Monero, Neo, Stellar, and Ripple, which none of them are NFT game projects. Similar to Kądziołka [33], Aljinović et al [34] study also does not provide a rating framework.…”

Special Issue “Mathematical Methods for Operations Research Problems”

“…Paper [10] deals with cryptocurrency portfolio selection and applies a multi-criteria approach based on PROMETHEE II. The authors found that their model gave the best cryptocurrency portfolio when considering the daily return, the standard deviation, the value-at-risk, the conditional value-at-risk, the volume, the market capitalization as well as nine cryptocurrencies for the period from January 2017 to February 2020.…”