Bitcoin: The biggest financial innovation of fourth industrial revolution and a portfolio's efficiency booster

【Author】 Li, Jing-Ping; Naqvi, Bushra; Rizvi, Syed Kumail Abbas; Chang, Hsu-Ling

【Source】TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE

【影响因子】10.884

【Abstract】Fourth industrial revolution has brought with it a consistently growing use of technology in all fields of life, including finance and investment. Amidst all this, Bitcoin also emerged on the surface of the financial markets in 2008, as one of the biggest innovations of our century. However, since then, it has largely been scrutinized for the benefits and risks that it puts forth in terms of the economic growth, financial system's stability and the welfare of overall society. In this study, we evaluate how the financial industry can use Bitcoin for improving the efficiency and wealth of the society, by focusing on portfolio optimization. Our results show that Bitcoin has an enormous tendency to improve an investor's risk-return profile. This efficiency is clearly visible in the upward shifts of the efficient frontiers, once Bitcoin is added in the universe of investable assets. Bitcoin's efficiency is valid for when the short selling was, and, was not restricted. It is important to note that our findings are based on the data that spans over a timeframe of a decade, and provides a medium to long term perspective on Bitcoin, which was not the case with the earlier studies.

【Keywords】Innovation; Bitcoin; Efficient frontier; Mean-variance; Sharpe ratio

【发表时间】2021 JAN

【收录时间】2022-01-02

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