1. bookVolume 16 (2021): Issue 2 (August 2021)
Journal Details
License
Format
Journal
eISSN
2344-5416
First Published
06 Mar 2015
Publication timeframe
3 times per year
Languages
English
access type Open Access

Do Cryptocurrencies Offer Diversification Benefits for Equity Portfolios?

Published Online: 27 Sep 2021
Page range: 5 - 18
Journal Details
License
Format
Journal
eISSN
2344-5416
First Published
06 Mar 2015
Publication timeframe
3 times per year
Languages
English
Abstract

Cryptocurrencies are becoming an exciting topic for legislative bodies, practitioners, media, and scholars with diverse academic backgrounds. The work identifies diversification benefits when cryptocurrencies are combined with the equity instruments from Visegrad Stock Exchanges. Furthermore, the results of the study explore financial and economic benefits for the investors of combining cryptocurrencies with equity stocks on the mixed portfolio. Three different independent experiments were conducted to observe diversification benefits generated from cryptocurrencies. Results from the two experiments show that cryptocurrencies employ higher portfolio risk and generate higher returns when they are involved with equity stocks portfolios. The first experiment indicates that cryptocurrencies reduce the risk level of the equity portfolios while increase average returns. Providing the equity portfolios with additional equity stocks lower the portfolio risk which is in line with the theoretical paradigms. Results indicate that cryptocurrencies must be seriously considered by the portfolio managers as an essential aspect of the portfolio diversification benefits. Future studies might raise the samples of selected portfolios with stocks from different stock indexes, to identify the problem from a broader perspective.

Keywords

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