Portfolio Effects of Cryptocurrencies during the COVID-19 Crisis

A New World Post COVID-19 Lessons for Business, the Finance Industry and Policy Makers, edited by Monica Billio and Simone Varotto

14 Pages Posted: 13 Oct 2020

See all articles by Maria Gonzalez

Maria Gonzalez

University of Castilla-La Mancha

Francisco Jareño

Universidad de Castilla-La Mancha

Frank S. Skinner

Brunel University

Date Written: October 12, 2020

Abstract

We investigate the performance of optimised three asset portfolios comprised of stocks, bonds and a cryptocurrency or gold for the period immediately before and during the COVID-19 financial crisis. We compare the performance of these portfolios with a two-asset cash portfolio comprised of stocks and bonds. Cryptocurrencies have the potential to control risk as most portfolios that include cryptocurrencies consistently experienced risk no greater than 50 basis points above the risk experienced by cash portfolios. However, there is no free lunch. While three asset portfolios can control risk, they also have a lower return per unit of risk.

Keywords: Portfolio Optimization, Bitcoin, Cryptocurrency, Altcoin, Gold

JEL Classification: G11, G15

Suggested Citation

Gonzalez, Maria and Jareno, Francisco and Skinner, Frank S., Portfolio Effects of Cryptocurrencies during the COVID-19 Crisis (October 12, 2020). A New World Post COVID-19 Lessons for Business, the Finance Industry and Policy Makers, edited by Monica Billio and Simone Varotto, Available at SSRN: https://ssrn.com/abstract=3709715 or http://dx.doi.org/10.2139/ssrn.3709715

Maria Gonzalez

University of Castilla-La Mancha ( email )

Plaza Universidad, 1
02071 Albacete, Ciudad Real 13071
Spain

Francisco Jareno

Universidad de Castilla-La Mancha ( email )

Plaza Universidad, 1
Albacete, Albacete 02071
Spain

HOME PAGE: http://www.uclm.es/profesorado/fjareno

Frank S. Skinner (Contact Author)

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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