Izvorni znanstveni članak
https://doi.org/10.2478/crebss-2019-0012
The impact of cryptocurrency on the efficient frontier of emerging markets
Karlo Ćosić
orcid.org/0000-0003-4232-0750
; Croatia
Anita Čeh Časni
orcid.org/0000-0002-2742-8619
; Faculty of Economics and Business, University of Zagreb, Croatia
Sažetak
Cryptocurrencies are a sweltering topic in modern times of investment strategies. Since the cryptocurrency market is classified as an emerging market, in this paper a portfolio of emerging markets is compiled from the indices of four European Union (EU) countries and one cryptocurrency. The aim of this paper is to investigate how the incorporation of the Bitcoin cryptocurrency into the portfolio affects the performance of the portfolios of these countries. Moreover, by drawing an efficient frontier, the paper identifies where Bitcoin stands relative to other indices in the portfolio. The countries whose indices were used in the analysis are: Croatia, Hungary, Romania and Poland during the period from July 13, 2018 to June 07, 2019. The method used for an efficient frontier formation is Markowitz’s Modern Portfolio Theory (MPT). By applying this theory, the minimum variance portfolio at the efficient frontier was created for the portfolio with and without the cryptocurrency. The empirical analysis indicates that Bitcoin improves the effectiveness of the portfolio in emerging markets of the selected EU countries, where the expected risks of a portfolio that includes the cryptocurrency are smaller and with higher returns than those of portfolios without Bitcoin. From the Markowitz’s theory point of view, the results of the empirical analysis also indicate that Bitcoin is on the efficient frontier. Since all instruments on the efficient frontier according to the modern portfolio theory are efficient, it can be concluded that investments in such instruments depend on investor’s risk aversion.
Ključne riječi
Bitcoin; cryptocurrency market; efficient frontier; emerging markets; Markowitz modern theory
Hrčak ID:
229674
URI
Datum izdavanja:
12.12.2019.
Posjeta: 3.094 *