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Cryptocurrencies in institutional investors’ portfolios: Evidence from industry stop-loss rules

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  • Białkowski, Jędrzej

Abstract

Cryptocurrencies are characterized by very high volatility, which makes them unlikely candidates for institutional investors’ portfolios. Our paper examines whether the application of industry stop-loss rules makes investment in cryptocurrencies more feasible for institutional investors. We show that volatility and returns on investment in a single cryptocurrency or a portfolio of cryptoassets are nearly halved when stop-loss rules are in place. Moreover, our analysis shows that the survival rate of long positions in cryptocurrencies does not exceed 35%. We conclude that the application of stop-loss rules may help in managing the risk of investment in cryptoassets. Our results also highlight the importance of the development of cryptoasset-specific stop-loss rules to deal with the low survival rate.

Suggested Citation

  • Białkowski, Jędrzej, 2020. "Cryptocurrencies in institutional investors’ portfolios: Evidence from industry stop-loss rules," Economics Letters, Elsevier, vol. 191(C).
    • Handle: RePEc:eee:ecolet:v:191:y:2020:i:c:s0165176519304227
    DOI: 10.1016/j.econlet.2019.108834
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Cryptocurrencies; Institutional investor; Portfolio optimization; Stop-loss rules;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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