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Cryptocurrency Portfolios Using Heuristics

In: Essays on Financial Analytics

Author

Listed:
  • Emmanouil Platanakis

    (School of Management, University of Bath)

  • Charles Sutcliffe

    (University of Reading)

Abstract

Given the support from academic studies for heuristic (naive) asset allocation strategies, this study compares the performance of seven heuristics, including four new heuristics, in forming a portfolio of six popular cryptocurrencies. As many cryptocurrency traders are retail investors, they are likely to use heuristics, rather than sophisticated optimization procedures. Our empirical analysis shows little difference in the out-of-sample performance of these seven strategies, indicating that it does not matter which heuristic is used by cryptocurrency investors. Therefore, retail investors might as well use the simplest heuristic (1/N) strategy, whose performance has been widely studied and found to be comparable with that of portfolio optimization models.

Suggested Citation

  • Emmanouil Platanakis & Charles Sutcliffe, 2023. "Cryptocurrency Portfolios Using Heuristics," Lecture Notes in Operations Research, in: Pascal Alphonse & Karima Bouaiss & Pascal Grandin & Constantin Zopounidis (ed.), Essays on Financial Analytics, pages 117-128, Springer.
    • Handle: RePEc:spr:lnopch:978-3-031-29050-3_7
    DOI: 10.1007/978-3-031-29050-3_7
    as

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