Evaluation of Cryptocurrency Portfolios

Adam Uhliarik

Student thesis: Master thesis

Abstract

In this thesis I look at viability of portfolios with cryptocurrencies and try to answer whether including them in a portfolio is a way to increase its performance. To do this, I construct two cryptocurrency indices, one with unrestricted weights and the other with maximum weight of 30% for any single constituent for the period from January 2017 to December 2019. Subsequently, I include these indices in a portfolio, which I optimize using three different methods, and test their out-of-sample performance. Despite finding by using the Markowitz optimization that inclusion of cryptocurrencies in a portfolio is beneficial, after taking into account the transaction costs and infeasible weights produced by this approach, real-life investor would be better off by not investing into cryptocurrencies and this conclusion is supported by the results of the other two optimization methods, namely parametric and Black-Litterman.

EducationsMSc in Advanced Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages41