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
Date Written: October 12, 2020
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: Suggested Citation