Diversification in financial and crypto markets

【Author】 Ben Osman, Myriam; Galariotis, Emilios; Guesmi, Khaled; Hamdi, Haykel; Naoui, Kamel

【Source】INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

【影响因子】8.235

【Abstract】This article investigates the conditional value at risk (CVaR) of two portfolio optimiza-tion approaches con-taining assets from the financial and crypto markets. We first catch the conditional interdependence structure among each variable through the vine-copula-GARCH model before merging it with the Mean-CVaR model. We then optimize each portfolio and find out the optimal allocation while evaluating the precise risk. The results indicate that the D-Vine copula is more suitable for both portfolios and that, when different conditional stock indices information are being taken into consideration, the crypto-market components can act as a weak hedge/ safe haven against financial market indices. Furthermore, as CVaR is found to outperform the mean-variance of Markowitz in both portfolios, both risk measures similarly show that when including cryptocurrencies in a portfolio, the S & P 500 shall not be included. Additionally, the inclusion of Ethereum in a portfolio already containing Bitcoin does not boost the return.

【Keywords】Bitcoin; Cryptocurrency; Hedge; Portfolio diversification; CVaR; Financial market

【发表时间】2023 OCT

【收录时间】2023-09-01

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