Optimal vs. Naïve Diversification in Cryptocurrencies
11 Pages Posted: 27 Jul 2018 Last revised: 23 Jan 2019
Date Written: January 21, 2019
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.
Keywords: Cryptocurrencies, Optimal Diversification, Naive Diversification, Portfolio Optimization
JEL Classification: G11
Suggested Citation: Suggested Citation