Empirical Evidence on Bitcoin Returns and Portfolio Value

The International Journal of Business and Finance Research, v. 13 (2) p. 71-81, 2019

11 Pages Posted: 11 Feb 2020

See all articles by Sandip Mukherji

Sandip Mukherji

Howard University - School of Business

Date Written: 2019

Abstract

This paper studies 60 months of recent returns to examine relationships between bitcoin and 16 exchange- traded funds of currencies, bonds, stocks, commodities, and alternative assets. Bitcoin provides much higher returns, positive skewness, volatility and extreme returns, than all the other assets. Only stocks offer a better risk-return tradeoff than bitcoin. Bitcoin returns have very weak positive correlations with stocks, commodities, and alternatives. Only two funds of stocks and commodities have significant explanatory power of about 3% each for bitcoin returns. The full model of all the 16 funds explains only 15.09% of bitcoin returns. A partial model, with the six funds that are significant in the full model, explains 12.78% of bitcoin returns; 3 stock funds and 1 commodity fund have significant coefficients in this model. These findings indicate that bitcoin is a unique asset which is only weakly related to stocks and commodities. The results also show that small allocations to bitcoin improve the risk-return tradeoffs of stock and bond portfolios.

Keywords: Cryptocurrencies, Bitcoin, Return Distributions, Explanatory Factors, Optimal Portfolios

JEL Classification: G11, G12

Suggested Citation

Mukherji, Sandip, Empirical Evidence on Bitcoin Returns and Portfolio Value (2019). The International Journal of Business and Finance Research, v. 13 (2) p. 71-81, 2019. Available at SSRN: https://ssrn.com/abstract=3461846

Sandip Mukherji (Contact Author)

Howard University - School of Business ( email )

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Washington, DC 20059
United States
202-806-1591 (Phone)

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