Portfolio management with cryptocurrencies: the role of estimation risk

Platanakis, 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 doi: 10.1016/j.econlet.2019.01.019

Abstract/Summary

This 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.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/81734
Identification Number/DOI	10.1016/j.econlet.2019.01.019
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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