Optimal vs. Naïve Diversification in Cryptocurrencies

11 Pages Posted: 27 Jul 2018 Last revised: 23 Jan 2019

See all articles by Emmanouil Platanakis

Emmanouil Platanakis

University of Bath - School of Management

Charles Sutcliffe

University of Reading - ICMA Centre

Andrew Urquhart

ICMA Centre, Henley Business School

Date Written: January 21, 2019

Abstract

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

Platanakis, Emmanouil and Sutcliffe, Charles M. and Urquhart, Andrew, Optimal vs. Naïve Diversification in Cryptocurrencies (January 21, 2019). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3209573

Emmanouil Platanakis (Contact Author)

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Charles M. Sutcliffe

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Andrew Urquhart

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

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