The Economic Value of Bitcoin: A Volatility Timing Perspective with Portfolio Rebalancing

25 Pages Posted: 8 Oct 2022

See all articles by Jui-Cheng Hung

Jui-Cheng Hung

Chinese Culture University - Department of Banking and Finance

Hung-Chun Liu

Chung Yuan Christian University

J. Jimmy Yang

Oregon State University

Multiple version iconThere are 3 versions of this paper

Abstract

Based on the volatility timing framework, this study uses intraday futures contracts (Bitcoin, gold, E-mini S&P 500, and 10-year T-Note) to investigate the economic value of adding Bitcoin instead of gold to a traditional financial portfolio. More important, we analyze the role of rebalancing strategies on portfolio performance when transaction costs are considered. Our results show that Bitcoin improves the performance of a stock-bond portfolio. Specifically, when our proposed rebalancing strategies are implemented, the minimum volatility portfolio with Bitcoin outperforms that with gold. We show that it is crucial to consider transaction costs when evaluating the performance of rebalancing strategies.

Keywords: Bitcoin, Volatility timing, realized volatility, Portfolio rebalancing, RGARCH

Suggested Citation

Hung, Jui-Cheng and Liu, Hung-Chun and Yang, J. Jimmy, The Economic Value of Bitcoin: A Volatility Timing Perspective with Portfolio Rebalancing. Available at SSRN: https://ssrn.com/abstract=4241996

Jui-Cheng Hung

Chinese Culture University - Department of Banking and Finance ( email )

Yaipei, 111
Taiwan

HOME PAGE: http://crbbbf.pccu.edu.tw/files/15-1142-6868,c3832-1.php

Hung-Chun Liu (Contact Author)

Chung Yuan Christian University ( email )

No. 200, Zhongbei Rd., Zhongli Dist.
Taoyuan, 32023
Taiwan

J. Jimmy Yang

Oregon State University ( email )

426 Austin Hall
Corvallis, OR 97331
United States
5417376005 (Phone)

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