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  • Portfolio Spiking with Cryptocurrency: A Risk-Adjusted Performance Analysis
     
    ►Onur Arugaslan
     onur.arugaslan@wmich.edu (Corresponding Author)
     https://orcid.org/0000-0001-9508-0741

    ►Ajay Samant
     asamant@ilstu.edu 
     https://orcid.org/0000-0002-0287-150X

    ►Devrim Yaman
     devrim.yaman@wmich.edu 
     https://orcid.org/0000-0002-3356-6954 
                                                                                      
    Received:18 April, 2022
    Final Revision: 21 June, 2022
    Accepted:  24 August, 2022
    e Published: 16 September, 2022
     doi.org/10.52283/NSWRCA.AJBMR.20220701A03

    Abstract

    The objective of this study is to provide empirical documentation on the risk-adjusted performance of portfolios formed by investing in a Cryptocurrency such as Bitcoin and a risk-free asset.  The study evaluates the performance of these Bitcoin-spiked portfolios using statistical measures grounded in modern portfolio theory. Market returns are adjusted for the degree of total risk, systematic risk, and downside risk inherent in each portfolio, and the securities are then ranked on the basis of risk-adjusted performance. In addition to standard Sharpe, Jensen, and Treynor performance measures, two newer evaluation metrics, the Modigliani and Sortino measures, are used for ranking the portfolios. We report that these portfolios have varying levels of risk and return. Our key finding is that these portfolios’ risk-adjusted returns are not only quite impressive but also exceed that of S&P 500, our benchmark market portfolio. The implication of our results is that investors with higher risk tolerance could earn substantially higher returns by including a larger percentage of Bitcoin in their portfolios. Our results should be informative to individual and institutional investors contemplating investing in cryptocurrencies but aware of their high risk.
    Keywords: Cryptocurrencies, Bitcoin, Portfolio Analysis, Performance Measurement

    Pages:36-44 :: Download-View
 
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