Diversification in Financial and Crypto Markets
This article investigates the conditional value at risk (CVaR) of two portfolio optimization approaches containing assets from the financial and crypto markets. We first catch the conditional interdependence structure among each variable through the vine-copula-GARCH model before merging it with the Mean-CVaR model. We then optimize each portfolio and find out the optimal allocation while evaluating the precise risk. The results indicate that the D-Vine copula is more suitable for both portfolios and that, when different conditional stock indices information are being taken into consideration, the crypto-market components can act as a weak hedge/safe haven against financial market indices. Furthermore, as CVaR is found to outperform the mean-variance of Markowitz in both portfolios, both risk measures similarly show that when including cryptocurrencies in a portfolio, the S&P 500 shall not be included. Additionally, the inclusion of Ethereum in a portfolio already containing Bitcoin does not boost the return
Year of publication: |
2023
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Authors: | Ben Osman, Myriam ; Galariotis, Emilios C. ; Guesmi, Khaled ; Hamdi, Haykel ; Naoui, Kamel |
Publisher: |
[S.l.] : SSRN |
Saved in:
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