Portfolio management with cryptocurrencies: the role of estimation riskPlatanakis, E. and Urquhart, A. ORCID: https://orcid.org/0000-0001-8834-4243 (2019) Portfolio management with cryptocurrencies: the role of estimation risk. Economics Letters, 177. pp. 76-80. ISSN 0165-1765
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.econlet.2019.01.019 Abstract/SummaryThis paper contributes to the literature on cryptocurrencies, portfolio management and estimation risk by comparing the performance of naïve diversification, Markowitz diversification and the advanced Black–Litterman model with VBCs that controls for estimation errors in a portfolio of cryptocurrencies. We show that the advanced Black–Litterman model with VBCs yields superior out-of-sample risk-adjusted returns as well as lower risks. Our results are robust to the inclusion of transaction costs and short-selling, indicating that sophisticated portfolio techniques that control for estimation errors are preferred when managing cryptocurrency portfolios.
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