Should well-diversified portfolios contain cryptocurrencies? A quantitative analysis based on portfolio performance measures

Abstract

In this thesis we study whether cryptocurrencies should be included in a well-diversified portfolio or\nnot. Moreover, we try to determine if the capital asset pricing model holds for cryptocurrencies, like\nother investments assets. We conclude that cryptocurrencies should be a part of a well-diversified\nportfolio. We make this conclusion based on the results from a selection of the most used financial\nperformance metrics. We also conclude that the capital asset pricing model holds for\ncryptocurrencies. The data period we have looked at spans from 2010 and to the end of 2017,\nwhich is a relatively short time period and therefore a limitation in this study. Our results show that\ncryptocurrencies have been an excellent investment opportunity in the time period of our research.\nOutperforming the traditional assets, cryptocurrencies provides a better return considering the risk,\neither the systematic, unsystematic or whole risk.