2017-07-10Diskussionpapier DOI: 10.18452/18716
Investing with cryptocurrencies
Härdle, Wolfgang K.
Cryptocurrencies have left the dark side of the finance universe and become an object of study for asset and portfolio management. Since they have a low liquidity compared to traditional assets, one needs to take into account liquidity issues when one puts them into the same portfolio. We propose use a LIquidity Bounded Risk-return Optimization (LIBRO) approach, which is a combination of the Markowitz framework under the liquidity constraints. The results show that cryptocurrencies add value to a portfolio and the optimization approach is even able to increase the return of a portfolio and lower the volatility risk. The codes used to obtain the results in this paper are available via www.quantlet.de
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