<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In this paper, cryptocurrencies are analysed as investment instruments. The study aims to verify whether they can be classified as an asset class and what kind of benefits they may bring to the investor's portfolio. We used 6 indices as proxies for the major asset classes, including the cryptocurrency index CRIX, for all cryptographic assets.</p><p>Cryptocurrencies relatively fully satisfied 7 asset class requirements, namely stable aggregation, investability, internal homogeneity, external heterogeneity, expected utility, selection skill and cost-effective access. It was found that crypto assets have diversification properties. Portfolio optimisation with the Modern Portfolio Theory showed an increase in the Sharpe ratio of tangency portfolios with the inclusion of CRIX. However, the Post-Modern Portfolio Theory identified significant deterioration of the downside risk and the Sortino ratio.</p></abstract>

In this paper, cryptocurrencies are analysed as investment instruments. The study aims to verify whether they can be classified as an asset class and what kind of benefits they may bring to the investor's portfolio. We used 6 indices as proxies for the major asset classes, including the cryptocurrency index CRIX, for all cryptographic assets.Cryptocurrencies relatively fully satisfied 7 asset class requirements, namely stable aggregation, investability, internal homogeneity, external heterogeneity, expected utility, selection skill and cost-effective access. It was found that crypto assets have diversification properties. Portfolio optimisation with the Modern Portfolio Theory showed an increase in the Sharpe ratio of tangency portfolios with the inclusion of CRIX. However, the Post-Modern Portfolio Theory identified significant deterioration of the downside risk and the Sortino ratio.

Cryptocurrencies as an asset class in portfolio optimisation

Central European Economic Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"Cryptocurrencies as an asset class in portfolio optimisation"}

In this paper, cryptocurrencies are analysed as investment instruments. The study aims to verify whether they can be classified as an asset class and what kind...

Cryptocurrencies as an asset class in portfolio optimisation

Published Online: Sep 09, 2020

Page range: 33 - 55

DOI: https://doi.org/10.2478/ceej-2020-0004

Keywords
cryptocurrencies, blockchain technology, asset class, portfolio optimisation, Modern Portfolio Theory, Post-Modern Portfolio Theory

© 2020 Olha Holovatiuk, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Cryptocurrencies as an asset class in portfolio optimisation

Published Online: Sep 09, 2020

Page range: 33 - 55

DOI: https://doi.org/10.2478/ceej-2020-0004

Keywordscryptocurrencies, blockchain technology, asset class, portfolio optimisation, Modern Portfolio Theory, Post-Modern Portfolio Theory

© 2020 Olha Holovatiuk, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
cryptocurrencies, blockchain technology, asset class, portfolio optimisation, Modern Portfolio Theory, Post-Modern Portfolio Theory