The influence of Bitcoin on Portfolio Diversification and Design

Abstract We employ a VARMA DCC-GARCH model to search for portfolio diversification with Bitcoin in global industry portfolios and bond index. We find lower dynamic conditional correlations between Bitcoin and industry portfolios and bond index, allowing an investment in Bitcoin to hedge the risk against industry portfolios and bonds. The most effective hedge in a Bitcoin/industry (bond) portfolio is to short Utilities sector. Results are robust to the use of US industry portfolios and a cryptocurrency index instead of global industry portfolios and Bitcoin, respectively. Our results can help investors make informed decisions with regard to risk management and portfolio analysis.

• Publication year

  2020

• Venue

  Social Science Research Network

• Publication date

  2020-11-01

• Fields of study

  Business, Economics, Computer Science

• Identifiers
  DOI 10.1016/j.frl.2019.101344
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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