Portfolio performance analysis: a case study of cryptocurrencies

Aliu, Florin; Nuhiu, Artor; Pálka, Přemysl; Blahová, Michaela

doi:10.1504/ijbc.2020.111571

Cited by 2 publications

(2 citation statements)

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“…The additional element of the portfolio risk is related to the weight concentration measured through the Herfindahl-Hirschman index. The higher (lower) the level of concentration in particular securities, the higher (lower) the portfolio risk (Aliu et al , 2020c; Kacperczyk et al , 2005; Kumar, 2007). The volatility of financial assets 49.4% measured through the standard deviation of returns stands as a supplementary input of the portfolio risk.…”

Section: Methodsmentioning

confidence: 99%

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Aliu

Bajra

Preniqi

2021

SEF

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Purpose This study aims to investigate the diversification benefits attached to the crypto portfolios when combined with stocks, Forex instruments and commodity assets. Design/methodology/approach Markowitz diversification techniques have been used to analyze the risk-return tradeoffs of the individual portfolios. Daily prices on cryptocurrencies and the selected asset classes, cover the period before and during the pandemic COVID-19. The portfolio risk of the portfolios was calculated by identical techniques and analyzed with equal criteria. Findings The results with 270 trails indicate that stocks on average reduce the portfolio risk of crypto portfolios by 36% followed by fiat currency with 30.9% and commodities by 20.8%. Average daily returns stand in line with the standard portfolio theories where riskier portfolios offer higher returns and the other way around. Originality/value The authors contribute to the current literature by investigating the portfolio risk attached to the crypto portfolios when stocks, commodities and Forex instruments were added separately. To this end, results inform not only retail investors but also portfolio managers on the asset classes that generate better optimization for crypto portfolios.

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Section: Methodsmentioning

confidence: 99%

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Aliu

Bajra

Preniqi

2021

SEF

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“…Markowitz (1952) set the foundations of the modern portfolio theory (MPT), where portfolio optimization is built in the relationship between risk and returns. In this context, cryptocurrencies hold features of financial securities as diversification risk declines when the number of cryptocurrencies increases within the portfolio (Aliu et al, 2020b; Bouri et al, 2020; Elu & Williams, 2022; Khaki et al, 2022). However, a small part of the participants in this industry has ambitions to keep cryptocurrencies as a long-term investment.…”

Section: Introductionmentioning

confidence: 99%

Making Informed Decisions in the Volatile Crypto Market: An Analysis of Portfolio Risk and Return

Nuhiu,

Aliu,

Horák

et al. 2023

Sage Open

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Despite widespread skepticism linked to cryptocurrencies, they are constantly gaining the interest of scholars, investors, media, and regulators. Recognizing the importance that portfolio risk maintains for crypto participants, this study attempts to shed light on this issue. We investigate the risk-return tradeoffs of the most tradable cryptocurrencies based on portfolio diversification techniques. Three different crypto portfolios containing a diverse number of cryptocurrencies were created to analyze the diversification risk from a historical perspective. Data concerning daily prices and their trade volume was collected from the Coin Market Cap database and covered the period from 1 January 2016 to 31 December 2022. The results regarding the risk-reward tradeoff stand in line with the portfolio theory, where higher expected returns offset higher risk. On average, the portfolio composed of 10 cryptocurrencies offers better optimization than the one with five, as it generates the same returns with lower risk. The year 2018 reflects the maximum diversification benefits in the three portfolios, corresponding to the period when cryptocurrencies gained massive popularity. From the managerial perspective, results inform crypto and institutional investors of the possible diversification benefits of the 15 most traded cryptocurrencies.

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Portfolio performance analysis: a case study of cryptocurrencies

Cited by 2 publications

References 0 publications

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Making Informed Decisions in the Volatile Crypto Market: An Analysis of Portfolio Risk and Return

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