This paper contributes to the literature on cryptocurrencies, portfolio management and estimation risk by comparing the performance of naïve diversification, Markowitz diversification and the advanced Black-Litterman model with VBCs that controls for estimation errors in a portfolio of cryptocurrencies. We show that the advanced Black-Litterman model with VBCs yields superior out-of-sample risk-adjusted returns as well as lower risks. Our results are robust to the inclusion of transaction costs and short-selling, indicating that sophisticated portfolio techniques that control for estimation errors are preferred when managing cryptocurrency portfolios.
- Estimation errors
- Portfolio optimization
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
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- Management - Senior Lecturer (Associate Professor)
- Accounting, Finance & Law
- Centre for Governance, Regulation and Industrial Strategy
Person: Research & Teaching