Mimicking crypto portfolios in sustainable investment

【Author】 Yu, Mengxia; Xu, Ke; Zheng, Xinwei

【Source】BRITISH ACCOUNTING REVIEW

【影响因子】4.761

【Abstract】In this paper, considering the difference in the energy demand level, we utilize the daily pricing data from 10/01/2019 to 06/30/2023 to construct mimicking crypto portfolios with 12 clean cryptocurrencies to replace the dirty cryptocurrency, Bitcoin (BTC). With a monthly rebalancing strategy, the mimicking portfolio closely matches the exposures to the risk factors of the BTC but with fewer specific risks. Furthermore, relying on the bivariate dynamic conditional correlation (DCC-) GARCH model, we compare the hedging capability of BTC and the corresponding mimicking crypto portfolio against movements of returns of sustainable assets. The empirical results show that the mimicking crypto portfolio provides ESG investors with a cheaper hedge tool of higher hedge effectiveness compared to the BTC. Moreover, we find that the mimicking crypto portfolio can act as a strong safe haven for the S&P &P Global Clean Energy Index and S&P &P Latin America Emerging LargeMidCap ESG Index during periods of market stress. Therefore, the mimicking crypto portfolio is a more attractive option for ESG investors due to its superior hedging efficiency and the added environmental advantages.

【Keywords】Cryptocurrency; Mimicking portfolio; Hedging; Sustainable investment; DCC-GARCH

【发表时间】2024 NOV

【收录时间】2024-10-07

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析