In this work we assume the institutional investor role and analyze a possible investment in bitcoin (BTC). We document several salient features of BTC employing monthly returns over the period from August 2010 to October 2017.
First, it provides unique diversification benefits for traditional
institutional portfolios. This diversification benefit appears to be
stable over our sample period. Second, bitcoin
is very volatile, indeed, but the historical return to risk ratio
appears attractive with a Sharpe Ratio of 1.176. Finally, using standard
portfolio optimization tools we find that the optimal allocation to BTC
is 1.3% over the sample we examined. We provide controversial evidence
that institutional investors are under allocated to BTC.
Read more > https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3082808
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