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The Mean-Variance Core of Cryptocurrencies: When More is Not Better

Author

Listed:
  • Galvani, Valentina

    (University of Alberta, Department of Economics)

  • Faychuk, Vita

    (Gustavus Adolphus College)

Abstract

We explore the existence of a mean-variance core subset of cryptocurrencies that subsumes the risk-reward of the broader market. The analysis considers both the perspective of long-short and long-only investors. The results indicate that most cryptocurrencies are redundant from the standpoint of both types of investors, with the exception of Bitcoin, which consistently improves the Sharpe ratio of even broad cryptocurrency portfolios. We show that the core can be often identified ex-ante as the cryptocurrencies attracting the highest levels of investors’ attention.

Suggested Citation

  • Galvani, Valentina & Faychuk, Vita, 2022. "The Mean-Variance Core of Cryptocurrencies: When More is Not Better," Working Papers 2022-4, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2022_004
    as

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    File URL: https://sites.ualberta.ca/~econwps/2022/wp2022-04.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Sharpe Ratio; Cryptocurrencies; Bitcoin; Short-Selling; Spanning;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General

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