Investment in Cryptocurrencies: A Perspective from Asset Pricing and Portfolio Theory

20 Pages Posted: 16 Feb 2021

See all articles by Michael J. Dempsey

Michael J. Dempsey

Ton Duc Thang University (TDTU)

Huy Nguyen Anh Pham

RMIT University

Vikash Ramiah

University of Wollongong

Date Written: April 10, 2020

Abstract

We consider the performance of cryptocurrencies in the light of fundamental asset pricing and portfolio theory. We observe how a traditional focus on reducing asset return volatility with Markowitz diversification actually misses the significance of such volatility for growth. The recognition that asset growth is more likely subject to exponential or continuously-compounding growth characteristics reveals that asset volatility can be exploited both across assets and across investment periods to deliver superior returns.

Keywords: cryptocurrencies, portfolio theory, asset pricing

JEL Classification: G10, G11, G12

Suggested Citation

Dempsey, Michael J. and Anh Pham, Huy Nguyen and Ramiah, Vikash, Investment in Cryptocurrencies: A Perspective from Asset Pricing and Portfolio Theory (April 10, 2020). Available at SSRN: https://ssrn.com/abstract=3783764 or http://dx.doi.org/10.2139/ssrn.3783764

Michael J. Dempsey (Contact Author)

Ton Duc Thang University (TDTU) ( email )

District 7
Ho Chi Minh City, 3001
Vietnam

Huy Nguyen Anh Pham

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

Vikash Ramiah

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

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