Risk Return Performance of Bitcoin and Alternative Investment Assets in Mixed Asset Portfolios in the Years 2018 to 2020

University of Kosice, Faculty of Economics, Letná 9, 042 00 Košice / Berlin Institute of Finance, Innovation and Digitalization e. V., Badensche Straße 52, 10825 Berlin

^* Corresponding author: david.elferich@gmail.com

Abstract

Research background: Since the financial crisis in 2008, numerous other cryptocurrencies have established themselves in the financial industry alongside Bitcoin. Although the validity of the user cases is still lacking, Bitcoin is already being used extensively in the institutional finance sector, among others. Here, the comparison of Bitcoin to other asset classes in mixed portfolio structures must be taken into account. According to the latter, far-reaching areas of investigation emerge by adding Bitcoin in the evaluation of risk-return ratios of mixed portfolio weightings.

Purpose of the article: The objective of this paper is to examine, within the framework of Harry Markowitz’s efficiency theory, the impact of including Bitcoin as an investment asset for the risk-return ratios of mixed portfolio structures.

Methods: The statistical analysis is based, among other things, on paired sample tests, where the return and volatility values are tested for significant differences in the selected test values.

Findings & Value added: The statistical investigations show that the introduction of Bitcoin leads to advantageous return structures, but at the same time to significantly increased volatility values of the examined portfolio constellations. Setting a regional focus of the investment assets in the investigations led to a simplified evaluation basis and at the same time offers the scientific space for further investigations.