Abstract
Cryptocurrencies have been the subject of much scholastic research in the last few years with many still fascinated with the phenomenon. This is especially so in the case of Bitcoin, arguably the most influential one. Some of these papers look at the market efficiency of such quasi-currencies while others hypothesise on the very definition of such assets, with many concluding their existence to hover between being a full-fledged currency and an investment asset. In this paper, we use several robust volatility estimators to compare the volatility and returns of Bitcoin vis-à-vis a selected number of other traditional assets and currencies to ascertain its risk diversification capability relative to these other assets and currencies. Further, we measure the risk per unit of return of the assets using the volatility estimates generated. We find Bitcoin to be one of the more attractive investment tool and test its risk diversification capabilities using the Markowitz Portfolio Theory. We propose an optimal portfolio allocation consisting of Bitcoin, stock and bond index.
| Original language | English |
|---|---|
| Pages (from-to) | 91-104 |
| Number of pages | 14 |
| Journal | International Journal of Business and Economics |
| Volume | 21 |
| Issue number | 2 |
| Publication status | Published - Sept 2022 |