The diversification benefits of cryptocurrencies in multi-asset portfolioscross-country evidence

Resumo

Using a sample of 21 developing and developed countries, we analyze whether a welldiversified investor of traditional assets (stocks, bonds, real estate, and commodities) may benefit from investing in cryptocurrencies. Country-specific analyses indicate that cryptocurrencies usually fit in the tangent portfolio (maximum Sharpe ratio) but no – or very little – in the minimum variance portfolio (MVP). Out-of-sample analysis indicates that even global portfolios that already benefits from international diversification may enjoy investing marginally in cryptocurrencies: mean-variance optimal and naive with cryptocurrencies outperformed otherwise identical portfolios in terms of risk-adjusted returns. Besides, exchange rate movements do not drive this better performance – it occurs for both local (all returns denominated in the local currency) and global perspectives (all returns in U.S. Dollars). We also find that cryptocurrencies’ diversification benefits occur both before and after the COVID-19 pandemics, with the 1/N portfolio with cryptocurrencies presenting the higher risk-adjusted returns. Our paper adds to the literature by analyzing the marginal effects of adding cryptocurrencies on a sample of developing and developed economies and considering up-to-date data following the COVID-19 crisis.

Ficha do documento

Tipo

Estudo

Ano

2021

Instituição

Escola de Economia de São Paulo

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

Identificador

oai:repositorio.fgv.br:10438/30213

Temas

EconomiaTecnologia

Palavras-chave

CryptocurrenciesDiversification benefitsPortfolio optimizationDigital assetsBitcoinEconomiaInvestimentos - AdministraçãoTransferência eletrônica de fundos