Title: Portfolio performance analysis: a case study of cryptocurrencies

Authors: Florin Aliu; Artor Nuhiu; Přemysl Pálka; Michaela Blahová

Addresses: Department of Finance, Faculty of Economics, University for Business and Technology (UBT), Prishtina, Kosovo ' Department of Financial Law, Faculty of Law, University of Prishtina, Prishtina, Kosovo ' Faculty of Management and Economics, Tomas Bata University, Zlín, Czech Republic ' Faculty of Management and Economics, Tomas Bata University, Zlín, Czech Republic

Abstract: The study measures the risk level linked with different portfolios of cryptocurrencies by using portfolio diversification techniques. Data on prices and trade volumes of cryptocurrencies were collected on a daily basis, from 2012 till 2018. Ten portfolios were constructed based on diverse types and numbers of cryptocurrencies. The results of the study confirm a negative relationship between the average number of cryptocurrencies and the average risk level of the portfolio. Involving more cryptocurrencies within the portfolio reduces the diversification risk of the portfolio. The average volatility and average correlation coefficient both drop when moving towards portfolios with more cryptocurrencies. Average returns stand against portfolio theories, where more risky portfolios offer less daily weighted average returns and the other way around. Outcomes of the study provide indications for the individual investors and financial institutions on the risk characteristic attached to the portfolio of cryptocurrencies.

Keywords: money; cryptocurrencies; financial securities; portfolio diversification; performance analysis.

DOI: 10.1504/IJBC.2020.111571

International Journal of Blockchains and Cryptocurrencies, 2020 Vol.1 No.3, pp.286 - 301

Received: 23 Dec 2019
Accepted: 05 May 2020

Published online: 24 Nov 2020 *

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