Economic Evaluation of Cryptocurrency Investment

51 Pages Posted: 6 Nov 2020 Last revised: 6 Jan 2021

See all articles by Ryuta Sakemoto

Ryuta Sakemoto

Okayama University; Keio University

Date Written: December 14, 2020

Abstract

This study proposes a method to enhance cryptocurrency portfolio returns constructed by forecast models. We forecast returns on four liquid cryptocurrencies and determine the weights on the cryptocurrencies based upon a dynamic allocation framework. We assess the performances of the portfolios using the performance fee measures. Our results present that the proposed portfolios outperform the benchmark portfolio. The economic gain for an investor is sensitive to a change in the risk aversion parameter, which contrasts to the studies of exchange rates.

Keywords: Cryptocurrency, Bitcoin, Portfolio evaluation, Forecast model, Risk aversion

JEL Classification: G10, G11, G17

Suggested Citation

Sakemoto, Ryuta, Economic Evaluation of Cryptocurrency Investment (December 14, 2020). Available at SSRN: https://ssrn.com/abstract=3694404 or http://dx.doi.org/10.2139/ssrn.3694404

Ryuta Sakemoto (Contact Author)

Okayama University ( email )

1-1-1 Tsushimanaka, Kita Ward
Okayama, 700-0082
Japan

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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