Accessibility navigation


Should investors include bitcoin in their portfolios? A portfolio theory approach

Platanakis, E. and Urquhart, A. (2019) Should investors include bitcoin in their portfolios? A portfolio theory approach. The British Accounting Review. 100837. ISSN 0890-8389 (In Press)

[img] Text - Accepted Version
· Restricted to Repository staff only
· The Copyright of this document has not been checked yet. This may affect its availability.
· Available under License Creative Commons Attribution Non-commercial No Derivatives.

1MB

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1016/j.bar.2019.100837

Abstract/Summary

Many papers in recent years have examined the benefits of adding alternative assets to traditional portfolios containing stocks and bonds. Bitcoin has emerged as a new alternative investment for investors which has attracted much attention from the media and investors alike. However relatively little is known about the investment benefits of Bitcoin and therefore this paper examines the benefit of including Bitcoin in a traditional benchmark portfolio of stocks and bonds. Specially, we employ data up to June 2018 and analyse the potential out-of-sample portfolio benefits resulting from including Bitcoin in a stock-bond portfolio for a range of eight popular asset allocation strategies. The out-of-sample analysis shows that, across all different asset allocation strategies and risk aversions, the benefits of Bitcoin are quite considerable with substantially higher risk-adjusted returns. Our results are robust to rolling estimation windows, the incorporation of transaction costs, the inclusion of a commodity portfolio, alternative indices, short-selling as well as two additional optimization techniques including higher moments with (and without) variance-based constraints (VBCs). Therefore, our results suggest that investors should include Bitcoin in their portfolio as it generates substantial higher risk-adjusted returns.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:84380
Publisher:Elsevier

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation